Photographer: David Paul Morris / Bloomberg
Photographer: David Paul Morris / Bloomberg
The spectacular rally of GameStop Corp. unfolded further Tuesday and left other recent favorites of Reddit speculators behind, after bearish investors seemed to cover their positions and trading volume fell.
Shares of the video game retailer fell 28 percent, to $ 162, at 4:03 a.m. in New York’s premature trade. This reduced their advanced advance to 760%. AMC Entertainment Holdings Inc. fell 14% from the last U.S. close.
GameStop fell for the second time in three sessions on Monday, as trading volume fell to about a third the amount of the last five sessions after last week’s strong gains. The decline came when short interest fell to 53% of available shares, from more than 140% last month, according to data from financial analysis firm S3 Partners.
Read more: GameStop’s short interest falls on a sign covered by retailers
“Even if open short-term interest remains solid, the fading momentum could prevent another big step upwards,” Ipek Ozkardeskaya, a senior Swissquote analyst, said in written comments. “On the other hand, shortening GameStop shares would require very strong nerves, which would prevent the shares from plummeting more than necessary.”
Restrictions on how many shares investors can buy through the popular trading app Robinhood Markets Inc. they will probably keep retailers at bay. The platform relaxed restrictions on Monday afternoon to allow users to buy a limit of 20 GameStop shares. This exceeds the limit of one action before the market opens.
Short seller reaction
The lower number of shares sold short could also be a blow to traders ’thesis that a higher stock price would only produce more gains, as hedge funds betting against the Grapevine-based company, in Texas, they should cover their shorts.
The backlash against short sellers, including Citron Research, had been a key meeting point for retailers using Reddit to communicate their bets. The craze spread to companies like AMC Entertainment, which saw record volatility as trading volumes soared last week.
“The recent concentration of all these names had all the symptoms and similarities of a great inefficiency created by the excess of short circuit compared to the free flow of companies and the excess of liquidity,” said Alberto Tocchio, manager of Kairos Partners portfolios. “The increase in the Reddit factor is something that will accompany us in the future, it is an additional factor that all hedge fund managers should face.”
– With the assistance of Ksenia Galouchko
(Updates with premarket trading in the US)