Founded in 1984, GameStop is an American video game, consumer electronics, and gaming merchandise retailer. The company is headquartered in Grapevine, Texas , United States, and is the world’s largest video game retailer, operating 5,509 retail stores throughout the United States, Canada, Australia, New Zealand, and Europe as of February 1, 2020.
You probably know GameStop for its huge social media presence over the past month. In January 2021, a short squeeze resulted in a 1,500 percent increase in GameStop’s share price over the course of two weeks, reaching an all-time intraday high of US$483.00 as of January 29, 2021, on the New York Stock Exchange. This effect was mainly attributed to the Reddit community r/wallstreetbets, a subreddit dedicated to high-risk stock bets akin to gambling. Many individuals exchanged methods on how to make money quickly and what stocks to jump on, the main one being GME. The large social media presence caught the eye of Elon Musk, who in after-hours of trading tweeted ‘Gamestonk’ in reference to the r’wallstreetbets forum, causing the stock price to increase even more.
House Committee Hearing
Earlier on this month,the House Financial Services Committee hosted a live hearing on what occurred in late January when Robbin Hood halted all buying of GME stock, known to be a huge impact of the sudden stock price drop from well over $300 — back down again to the mid-$40s. Robinhood’s chief executive defended the app’s decision to halt trading in GameStop shares at the congressional hearing, calling allegations that the company acted to help hedge funds that were hemorrhaging money “absolutely false”. The comments triggered accusations the company is creating a “smokescreen” to deflect blame.
Speakers included: Keith Gill, Kenneth C. Griffin, Chief Executive Officer, Citadel LLC, Steve Huffman, Chief Executive Officer, Co-Founder, Reddit, Gabriel Plotkin, Chief Executive Officer, Melvin Capital Management LP, Vlad Tenev, Chief Executive Officer, Robinhood Markets, Inc., Jennifer Schulp, Director of Financial Regulation Studies, Cato Institute.
Gamestop appeared to be fading into the background after last weeks Capitol Hill testimony. However, there was news from the testimony of Keith Gill, aka Roaring Kitty, aka DeepF********Value on /wallstreetbets, that has the retail community ready to go to war again in Gamestop. Gill said of Gamestop during testimony to Capitol Hill lawmakers, “I do find that it’s an attractive investment at this price point”. Gill also appeared to have bought another 50,000 shares of GME as he shared a screenshot on /wallstreetbets resulting in shares in Gamestop rising 11% to $44.89 during Monday’s pre-market session. He now owns 100,000 shares of the company worth more than $4 million.
GME Round 2
GameStop stock dropped again shortly after the market opened on Tuesday 16th March. While some short sellers appeared to cover their bearish bets in recent weeks, a short-selling expert says he still sees plenty of squeeze potential.
Shares were down 19% to $178.12 around 10:30 a.m and then rose to $210 a couple hours later. Such levels are still many multiples higher than the stock’s one-year low of $2.57.
Ihor Dusaniwsky, managing director at short-selling analytics firm S3 Partners, told Barron’s on Monday that his firm estimates about 8.98 million GameStop shares (ticker: GME) were recently sold short, about 16% of shares available for trading.
Dusaniwsky said over the last month, his firm has seen about 7.5 million shorts covered, meaning bearish investors bought shares to cover their bets. The bulk came over the past week, when 4.6 million shares were covered, according to Barron’s.
“GME shorts are going through a short squeeze, and the stock continues to be on of the top stocks in our short squeeze potential metric, which means the squeeze is probably going to continue if its stock price remains at these levels or higher,” Dusaniwsky added.
The company’s shares rocketed higher last week following a company announcement that Chewy co-founder Ryan Cohen has been chairing a board committee aimed at transforming the retailer into a technology business. Cohen joined the board with two associates in January, kicking off GameStop’s parabolic ascent.
GameStop said it will report fiscal fourth-quarter results on March 23. Analysts expect adjusted earnings of $1.35 a share, up from $1.27 a share in the prior fiscal fourth quarter, according to FactSet.
When do you think the next GME squeeze will be?