Trading in video game retailer GameStop (GME) was halted briefly on Friday as it rose more than 70 percent, partly due to the enthusiastic support of a group of Reddit day traders.
The share has been more than 250 percent higher to date, and rose sharply last week after GameStop announced that Chewy CEO Ryan Cohen had joined its board, CNBC reported. The short seller Citron Research predicted that the price would fall, but members of the Reddit board r / wallstreetbets, who were interested in the stock, criticized Citron on the Reddit message board and continued to price the stock on social media.
The hype generated by r / wallstreetbets has helped create the ‘short press’ on GameStop’s inventory. A short print works as follows: some investors, known as shorts, essentially bet that a company’s stock will fall. These investors borrow shares from other investors and sell them – with plans to buy them back if prices fall and then return them to the original owner. The problem with shorting, however, is that one’s losses are theoretically infinite; If a stock starts an upward run, some short sellers will abandon their short-term and buy shares at the higher price to return. This causes the stock to go up again and burns any other shorts that remain in the stock, some of which in turn may choose to cover their own shorts.
GameStop is the stock in the market with the most short circuits, CNBC said, citing FactSet. More than 138 percent of its shares are sold short, which is the main target for a short press. GameStop’s Reddit-related boom caused a power outage it rose 69 percent (nice) on Friday around 12:45 ET.
Citron said on Friday it would not comment further on the GameStop share due to “the angry mob that owns this stock”. Citron Research editor Andrew Left wrote in a note to readers that the setback includes criminal activities he planned to report to the Securities and Exchange Commission, which include harassment of minors as well as financial crimes.
According to Bloomberg, was the most volatile period in GameStop’s share in its history over the past ten days. At the close of trading on Friday, GSE was up 50 percent higher than Thursday’s close, with a market capitalization of $ 4.5 billion.