Ramin Talaie | Bloomberg | Getty Images
GameStop has re-emerged after a wild session, pushing the stock back above $ 100 for a short time, but short sellers betting against the video game dealer are far from easing.
GameStop’s shares last rose more than 20% to around $ 92 in premarket trading on Tuesday after hitting triple digits in the premarket session. The surge came after a roller coaster day on Monday when the stock more than doubled and went negative within a few hours. The stock closed 18% on Monday at $ 76.79.
GameStop was up more than 300% in January alone when an army of retail investors took on short sellers in online chat rooms, encouraging each other to stack up and push the stock higher. Short sellers have lost $ 4.2 billion in market value year-to-date, including a loss of $ 917 million on Monday and another loss of $ 1.6 billion on Friday, according to S3 Partners.
Despite the massive shortages, short sellers are doubling their bearish bets. In the past 30 days, GameStop stock borrowed and sold rose 1.4 million shares, valued at $ 91 million. This corresponds to an increase of 2%, as the share price has more than doubled, according to S3 Partners.
Short sellers have also reloaded bets in the past seven days, with short selling stocks up 769,000, valued at $ 50 million. GameStop’s interest in shorts is unchanged from a week ago at 139%.
“Similar to the Revolutionary War, the first line of troops is drowning in a shower of musket fire, but is being replaced by the next troops,” said Ihor Dusaniwsky, S3 managing director for predictive analytics, in an email. “We’re seeing a short squeeze on older shorts that have suffered massive mark-to-market losses on their positions, but are seeing new shorts.”
“This keeps the short positions in GME stock relatively flat overall, although there is a significant short squeeze on a significant number of existing short sellers,” added Dusaniwsky.
The explosive rally in GameStop was mainly due to the buying frenzy of individual investors in online forums, especially the infamous Reddit chat room “wallstreetbets” with more than two million subscribers. A trend post on Tuesday includes a screenshot of the user portfolio showing a return of over 1,000% on GameStop stock.
The hedge fund Melvin Capital Management, which is short in GameStop, is down 30% this year through Friday, according to the Wall Street Journal.
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