GameStop's Wild Rise Drives Short Sellers to Throw in the Towel

[mahatmakanejeeves]

Full disclosure: until today, I'd never even heard of GameStop.

GameStop’s Wild Rise Drives Short Sellers to Throw in the Towel

Paul Jarvis and Bailey Lipschultz
Wed, January 27, 2021, 1:51 PM · 4 min read

(Bloomberg) -- GameStop Corp.’s breathtaking ascent showed no sign of slowing Wednesday, with bullish day traders keeping the upper hand over short sellers who started to capitulate. ... The shares rose 157% to a session-high of $380 shortly after 11 a.m. in New York, leading to at least two volatility halts. The advance means the video-game retailer’s market value has risen more than 20 times this month alone to about $26 billion, making GameStop bigger than more than a third of the companies in the S&P 500 Index.

The meteoric rally has left short sellers counting the cost in a battle with day traders who have taken to the Reddit social media platform to encourage others to follow their lead. Melvin Capital closed out its short position, while Citron Capital’s Andrew Left said the firm covered the majority of its short in “the $90’s at a loss of 100%.”

“It does feel like rationality and fundamentals are just kind of dead,” J Capital Research co-founder Anne Stevenson-Yang said by telephone. “If you’re short you’re in a very difficult position because you have to buy the stock to get out, so you end with a heavily overvalued stock.” ... GameStop didn’t respond to requests for comment. Meanwhile, White House Press Secretary Jen Psaki said that Treasury Secretary Janet Yellen and others in the Biden administration are monitoring the situation.

The stock’s gains were fanned late Tuesday after Tesla Inc. chief Elon Musk tweeted a link to a Reddit thread about the company. But famed fund manager Michael Burry warned that the manic rally has gotten out of hand, calling the stock’s rise “unnatural, insane, and dangerous.”

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[TheRealNorth]

1. My understanding....

Is that Gamestop is getting away from brick and mortar stores and is going to have more of an online presence. While that may help reduce their costs, I don't see it growing their market share in game sales. In fact, it will probably reduce any money they make in the trade-in market.

As more consoles and gaming companies go to direct download, I don't see their company's long-term prospects improving.

[getagrip_already]

2. maybe I'm missing something here....

professional traders set limits on their trades to mitigate surprises. The triggers would have kicked in automatically and while they would have some losses, they certainly wouldn't have gotten soaked.

And now that the stock has been pushed artificially high, they will jump back in as it eventually falls and make far more money than if nobody had gamed the stock price.

And fall it will. Once the small buyers get nervous they will get burned, they will sell quickly.

It sounds like a well crafted pump and dump operation. The ring leaders will be the first out, and will probably short the stock once they trigger a sell off.

[sweetloukillbot]

3. Reddit trolls manipulating the stock market for lulz and a quick profit

And grifter Elon Musk egging them on...

[mahatmakanejeeves]

4. "Purchase 60,000 shares of Bradlees at $0.98. Yes, I'm aware they've been defunct in 2001, ... "

TortiousInterferehat Retweeted

"Purchase 60,000 shares of Bradlees at $0.98. Yes, I'm aware they've been defunct in 2001, send the offer."

Link to tweet

It was up 4,000% this week. Not kidding.

Link to tweet