(Reuters) – GameStop Corp closed 6% lower on Friday when an initial rally occurred, but shares ended the week up 151% on a new rise that left analysts baffled.
Shares of the video game retailer closed at $ 101.74 after withdrawing from a maximum session of $ 142.90. The weekly rocket rise came despite a wider market sale that sent the benchmark S&P 500 .SPX drop of 2.5% over the same time.
Analysts have struggled to find a clear explanation, and some were skeptical that the rally would have legs.
“You may be able to make money fast and it can be a lot of money, but in the end, it’s the theory of the biggest fools,” said Eric Diton, president and CEO of The Wealth Alliance in New York. The theory is about buying stocks that are overvalued, anticipating that a “bigger fool” will buy them later at a higher price.
Analysts mostly ruled out a small squeeze like the one that fueled GameStop’s rally in January, when individual investors using Robinhood and other apps punished hedge funds that had bet on stocks, forcing them to roll out short positions. Many GameStop shoppers got their directions on online investment forums from Reddit and elsewhere.
Short-term interest accounted for 28.4% of the stock market on Thursday, compared with a peak of 142% in early January, according to S3 Partners.
Option market activity on GameStop, which has once again topped the list in a social media-driven retail frenzy, suggested that investors opted for higher prices, higher volatility. or both.
Refinitiv data showed that retail investors have been buying call options out of deep money, which have contractual prices to buy well above the current stock price.
Many of these options contracts were due to expire on Friday, which means attractive gains for those betting on a further rise in the price of GameStop shares.
Call options, profitable for headlines if GameStop shares reach $ 200- and $ 800 this week, have been particularly highly traded, the data showed. GameStop shares traded this week at $ 184.54 on Thursday, well below the $ 483 intraday high reached in January.
“Actors are looking to make the most of their impact and timing is important,” said David Trainer, CEO of investment research firm New Constructs. “The expiration of options will contribute to your strategy on how to drive stocks as much as they can and maximize their profits.”
Robots on major social media websites have announced GameStop and other “meme actions,” although it is not known to what extent they influenced prices, according to analysis by cybersecurity company PiiQ Media based in Massachusetts.
The U.S. Securities and Exchange Commission (SEC) on Friday suspended trading on 15 companies due to “questionable trading activity and social media.” GameStop was not among them.
The 15 companies joined six shares that it recently suspended due to suspicious activity on social media.
Robinhood said it has received inquiries from regulators about the temporary trading limits it imposed during a wild rise in short-term shares earlier this year.
Other Reddit favorites were also lower on Friday, with movie operator AMC Entertainment down 3.4%, headphone maker Koss up 22.4% and marijuana company Sundial Growers up 2.9%. %.
Report by Aaron Saldanha in Bengaluru; additional reports by Caroline Valetkevitch in New York, and Devik Jain and Sruthi Shankar; Written by David Randall; Edited by Alden Bentley, Shinjini Ganguli, Anil D’Silva, Dan Grebler and David Gregorio