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- Short sellers lost $ 664 million on Wednesday when GameStop shares traded 104% in the last 30 minutes, S3 Partners said.
- The stock’s 84% intraday gain on Thursday added another $ 1.19 billion in market-to-market loss.
- Reddit retailers revived the GameStop protest this week on new hope that the company could rediscover itself.
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Nearly one month after GameStop’s jump to record highs, Reddit retailers are increasing the share of meme again. And just like in the January rally, short sellers are getting very hurt.
Investors selling GameStop short, betting that the share price would fall, posted a $ 664 million loss in market-to-market as the gambling retailer’s shares fell 104%, according to financial analytics firm S3 Partners . The stock’s 84% intraday profit fueled another $ 1.19 billion in losses, bringing the two-day total to more than $ 1.85 billion.
To be sure, the losses pale in comparison to those fueled by the January boom. GameStop shorts are down $ 10.75 billion year-on-year, according to S3, due to their clumsy bets. The amount includes Thursday’s intraday rally.
GameStop only rose higher last month as day traders who lined up in online forums like Wall Street Bets subreddit gained shares in hopes of getting a big short press. Such a technique involves stocks becoming high enough to force short sellers to cover their own positions by buying the shares. Short-selling purchases further increase prices and form an upward spiral for the stock.
The Reddit trader phenomenon faded until February as the widespread selling of shares pulled from their extremely high levels. Yet a last-minute deal on Wednesday fueled the buying frenzy and spurred the new calls on Wall Street Bets to get a new short press.
It is unlikely that such pressure from the shares caused the last tear, Ihor Dusaniwsky, managing director of predictive analytics at S3, told Insider in an email.
“Although some buy-to-take coverage has been brought about by the huge loss of market-to-market, it has been offset by new short sellers seeking a setback from this volatile price movement,” he said.
The shorts also hold ground. The number of GameStop shares shorted over the past week has risen by 1.97 million, an increase of 15%.
The short stake in the stock is $ 1.42 billion, or 28.4% of the tradable shares. Although it is still a large amount, it is significantly lower than the short-term interest of almost 140% seen earlier in 2021.
Dusaniwsky says the number of shares sold short could fall further if GameStop’s share price applies. Losses are already big enough to worry clumsy investors, and could be another rally that breaks their intent, he added.
“A lot of pants are faltering on the verge of being squeezed out, and a move back to the peak of January will definitely push a lot of shorts over the cliff,” Dusaniwsky said.
GameStop traded at $ 148.47 from 3pm ET, 660% higher than the previous year.
Read more: GOLDMAN SACHS: These 40 sharply shortened stocks could be the next GameStop if retailers target them – and the group has nearly doubled in the past three months.
Market Insider