A head-scratching story about David and Goliath is played out on Wall Street at the price of a retailer losing money. An army of investors with small and optimistic pockets raises shares in GameStop. This is in direct opposition to a group of wealthy investors betting on lowering the retailer’s share price.
The result: the GameStop stock rose nearly 145% in less than two hours Monday morning, only to return to earth to close with a modest 18% gain that day. The shares were to jump again before the transaction started on Tuesday.
Overall, the stock has grown by over 400% in the last three months – unusual for a struggling company which has lost $ 1.6 billion in the last three years. Its shares have declined for six consecutive years before returning in 2020. But GameStop has been the target of many professional investors who say the company will continue to fund as sales of games continue to move online.
The investor says the family was threatened
These investors have bet that GameStop shares will decline. The most public expression was made by the short salesman Andrew Left from Citron Research, which said only on the basis of sales and earnings, GameStop shares are not worth more than $ 20 each. He went on to predict that the shares would fall back to $ 20, even if they went up a lot over the last week or so.
The left and others “short-circuited” the stock, which means they borrowed shares and sold them, hoping to buy them back at a cheaper price and cash in on the difference. Such bets have been disastrous recently.
GameStop traded for less than $ 18 a few weeks ago. Its shares rose after the company appointed three new directors to its board of directors, including a co-founder of online distributor Chewy, to help accelerate change. The idea was that it should help the digital transformation of GameStop.
Meanwhile, a cavalcade of smaller investors urged each other online to keep the momentum of the stock flying to the moon. Many present it as a battle of ordinary people against hedge funds and other large Wall Street firms.
In a bizarre turn, the left, normally sincere, on Friday, said he would don’t comment anymore on the GameStop stock, saying he and his family were threatened. A Youtube video detailing why Left thought the stock would fall has been removed from the video streaming site.
Game on
It took only five days for GameStop shares to double after the company announced the board’s unrest. Last Friday, it grew by 51% in a single day – which is more than the stock market has generally grown in more than three years. For GameStop, the 51% move was only the second best day of January.
The meteoric rise has pushed some failed sellers out of bets, which is achieved by buying the shares of the stock. This helped to accelerate his momentum even further. On Monday, the push and pull was so extreme that the trading of GameStop shares was temporarily stopped at least nine times for volatility.
It closed at $ 76.79 on Monday, hovering between $ 65.01 and $ 159.18 earlier that day.
“This is quite a lot of experience for my first month on the stock market. Holding to infinity,” a user posted in a Reddit discussion about GameStop shares. A moment later, another user said, “We’re literally stronger than the big companies right now.”
The same feeling has taken him far beyond the message boards on the Internet to Wall Street.
“As someone who started trading stocks in the late ’90s in college, I would always remember watching when small retail groups were crushed by hedge funds and skilled short sellers,” said Edward Moya. senior market analyst at OANDA. report. “What happened with the GameStop actions is a reminder of how times are changing.”
Additional reports provided by Stephen Gandel of CBS MoneyWatch.