A head-scratching story of David and Goliath is being played on Wall Street about the stock price of a video game retailer losing money. An army of optimistic, small-pocket investors is getting GameStop shares. This is directly opposed to a group of wealthy investors who are betting on falling retail stock prices.
The result: GameStop shares rose nearly 145% in less than two hours on Monday morning, to return to earth to close with a modest 18% gain on the day. Shares were to jump again before trading began on Tuesday.
Overall, shares have risen more than 400% in the last three months, which is unusual for company in difficulty which has lost $ 1.6 billion in the last three years. Its shares fell for six consecutive years before recovering in 2020. But GameStop has been the target of many professional investors who say the company will continue to be founded as game sales continue to move online.
The investor says the family was threatened
These investors have bet on GameStop shares to fall. The most public expression was made by the short salesman Andrew Left handed of Citron Research, which said that based solely on sales and earnings, GameStop shares were worth no more than $ 20 each. He went on to predict that stocks would fall back to $ 20, even when they surpassed strength last week or so.
Left and others “reduced” the stock, meaning they borrowed shares and sold them, hoping to buy them at a cheaper price and pocket the difference. These bets have been disastrous recently.
GameStop was trading at less than $ 18 a few weeks ago. Its shares rose after the company appointed three new executives to the board, including a co-founder of online distributor Chewy, to help speed up its change. The idea was that it should help the digital transformation of GameStop.
Meanwhile, a cavalcade of smaller investors has been urging online to keep the momentum of stocks flying to the moon. Many view it as a battle of normal people against hedge funds and other large Wall Street companies.
In a bizarre turn, the normally open left on Friday said it would he no longer comments to GameStop actions, saying he and his family had been threatened. A Youtube video explaining why Left thought the shares would fall was removed from the video streaming site.
The game begins
It only took five days for the shares of GameStop to double after the company announced its confusion to the board. Last Friday it rose 51% in a single day, surpassing the general rise of the stock market in more than three years. For GameStop, the 51% move was only the second best day in January.
The meteoric rise pushed some short sellers out of their bets, which is done by buying shares of the stock. This helped to further accelerate his momentum. On Monday, the push and pull was so extreme that trading in GameStop shares was temporarily halted at least nine times due to volatility.
It closed at $ 76.79 on Monday, after hovering between $ 65.01 and $ 159.18 earlier in the day.
“This is the whole experience of my first month in the stock market. Keep it to infinity,” a user posted in a Reddit discussion about GameStop shares. A moment later, another user said, “Right now we’re literally more powerful than big business.”
That same sentiment went far beyond Internet message boards to Wall Street itself.
“As someone who started trading stocks in the late’ 90s in college, I would always remember seeing small retail groups crushed by hedge funds and experienced short sellers, ”said Edward Moya, analyst senior market in OANDA. report. “What happened with GameStop’s actions is a reminder of how times change.”
Additional reports provided by Stephen Gandel of CBS MoneyWatch.