NEW YORK, Feb 25 — GameStop Corp shares surged more than 50 per cent in early deals today as amateur investors jumped back into the stock weeks after an unprecedented short squeeze triggered a 1,600 per cent rally in the video game retailer.
The latest moves build on yesterday’s rally in GameStop and other so-called “stonks” — an intentional misspelling of “stocks” — favoured by retail traders on social media sites such as Reddit’s WallStreetBets.
The new frenzy puzzled analysts, who had ruled out another short squeeze of the stock which had battered some hedge funds, and fuelled more hype after some Twitter users pointed out a cryptic tweet of an ice-cream cone photo from activist investor Ryan Cohen — a major shareholder in GameStop and a board member.
A short squeeze takes place when the price of a heavily-shorted stock rises sharply, forcing short-sellers who had bet against the stock to buy it at those prices to avoid further losses.
GameStop shares were up 54.5 per cent in trading before the bell at US$141.70 (RM572) at 0630 ET. Headphone maker Koss Corp surged 57 per cent, while cannabis company Sundial Growers rose 10 per cent.
Shares of cinema operator AMC Entertainment, another stock caught up in last month’s rally, jumped 17 per cent in pre-market trading today following an 18.1 per cent rise yesterday.
Reddit discussion threads were buzzing again about GameStop today, with members exhorting others to pile into the stock as the rally gathers steam.
“Bought lots more #GME today, let’s keep fighting !!,” wrote one Reddit user Fundssqueezzer, while another user Responsible_Fun6255 said, “Rise of the planet of the ape: GME edition”.
Earlier today, GameStop’s Frankfurt-listed shares trebled at one point, overshooting its 100 per cent surge on Wall Street overnight, as European retail traders joined in the fresh buying push.
The sharp moves surprised the market, which thought the excitement behind the recent Reddit-fuelled rally had died down.
Risky bets
GameStop shares skyrocketed in January as retail investors, urged on by popular Reddit forum WallStreetBets, bought the stock as a way to punish hedge funds that had taken an outsized short bet against it.
The squeeze “personally humbled” Melvin Capital’s Gabriel Plotkin, whose firm was left needing a US$2.75 billion dollar lifeline supplied by hedge fund Citadel LLC’s Kenneth Griffin and Point72 Asset Management’s Steven Cohen.
The risky trading strategies employed by some traders on Reddit have drawn the ire of investing legends such as Charlie Munger, long time business partner of Warren Buffett.
“It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors,” said Munger, Berkshire Hathaway’s vice chairman.
GameStop’s US-listed shares soared nearly 104 per cent yesterday. The volatility in GME, AMC Entertainment and other stocks led to outages on Reddit and periodic trading halts by the New York Stock Exchange.
Online brokerage Robinhood said in a tweet that the NYSE action would impact all brokerages, but that it had not paused trading on the shares.
“It’s a pretty risky play to try and buy now ... what we might (see) at the open of the cash market is some people trying to get in,” said Oriano Lizza, premium sales trader at CMC Markets in Singapore, which does not offer pre- or post-market trade.
The latest surge comes after a couple of weeks that saw the shares move in relatively tighter ranges.
“It’s a marathon, not a sprint. Whatever happens resist the urge to sell. The longer we hold the higher it goes,” said @catchme1fyoucan, an Italy-based user of retail trading platform eToro, in a discussion on GameStop. — Reuters
