GameStop's shares are now up more than 1,000% since the beginning of the year. Analysts say the stock's staggering ascent is due largely to a short squeeze, driven by a slew of individual investors who are coordinating their buying efforts on sites such as Reddit and Twitter ( NYSE:TWTR) . GameStop's stock price is up more than tenfold in 2021.
Full Answer
Why did the price of GameStop stocks jump so suddenly?
The company’s stock price has soared this year on rising enthusiasm over GameStop Chairman Ryan Cohen’s reputation and his efforts to orient the company toward e-commerce.
Why did GameStop stock rise?
GameStop Corp. (NYSE:GME) shares, rose in value on Thursday, February 17, with the stock price down by -3.83% to the previous day’s close as strong demand from buyers drove the stock to $123.41. Actively observing the price movement in the last trading ...
Why is GameStop stock going up?
GameStop Corp. (NYSE:GME) shares are trading lower Monday alongside other meme stocks. The stock is continuing to slide lower after the company’s quarterly earnings report last Wednesday showed a 30% revenue boost, but a large widening loss-per-share.
When did the GameStop stock thing start?
The stock opened on Jan. 27 at a whopping $354.83 a share. Citron Capital and Melvin Capital, two firms shorting GameStop stock that were referenced heavily in the r/wallstreetbets forum, said on Tuesday that they were closing their positions.
What made GameStop stock go so high?
Melvin Capital and Citron were two of the funds caught in the squeeze, forcing them to buy more GameStop stock to cover their losses, which ended up driving the stock price even higher.
Why is GameStop stock rising so fast?
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.
Who made money on GameStop?
One veteran who said he made millions on GameStop was Bill Gross, the retired “bond king” and former star manager at California money management giant Pacific Investment Management Co.
How did GameStop stock work?
In a short sale, they borrow a share of GameStop and then sell it. Later, if the stock price does as they expect, they can buy the stock at a lower price and keep the difference. GameStop is one of the most heavily shorted stocks on Wall Street.
Who owns GameStop stock?
Despite GameStop’s bleak outlook, last year a well-known investor named Ryan Cohen increased his holdings of GameStop stock to more than 10% of the company, with hopes of transforming the mainly physical retailer into more of an online player.
How many stores does GameStop have?
GameStop (NYSE: GME) is primarily a bricks-and-mortar video game retailer with more than 5,000 stores. But this business model is frowned upon by many in the investment community due to both long-term and short-term factors. Long-term, fewer and fewer gamers actually journey out to physical stores to purchase their games.
How much did GameStop lose in 2020?
The company had a net loss of $18.8 million, or 0.29 per share. As a result of results like that, GameStop stock had been drifting lower for years. It was around $56 a share in late 2013, but had fallen to under $4 by March of 2020. Of course, that was before the massive surge.
What hedge fund lost money on GameStop?
In fact, one hedge fund called Melvin Capital lost so much money on its GameStop short positions that it needed a capital infusion of nearly $3 billion to shore up its finances. And GameStop isn’t the only stock that has seen this kind of tug of war between retail investors and hedge funds lately. A few others include:
Is GameStop a dying company?
GameStop has suffer ed massive ly from these negative trends. And some have begun to consider it a dying business. In the third quarter of 2020 (the most recent reported), sales were about $1 billion, down 30% from the same quarter in 2019. The company had a net loss of $18.8 million, or 0.29 per share.
Did hedge funds bet against GameStop?
Several major hedge funds looked at GameStop’s books and decided that the company was doomed to fail eventually. So they bet against GameStop stock by shorting it. That means they borrowed the stock and sold it, hoping to buy it back later (and return it to the stock lender) after the stock price fell.
What happens when you buy stock?
When you buy stock in a company, you’re (typically) making a bet that something will happen that leads that company’s stock to grow in value: a popular new product, a big executive hire, a great quarterly report, and so on. But if you think a company is going to tank, you can “short” that firm—basically, you borrow a number ...
Is GameStop running out of batteries?
But overall, GameStop is running out of extra lives, its batteries are dying, and its parents are telling it to go to bed because it’s got school in the morning. Sorry, the video player failed to load. (Error Code: 100013) The seeming inevitability of GameStop’s demise made it an obvious target for short sellers.
What is the maximum loss of a stock?
When owning, or being long, a stock, your maximum loss is the amount of your investment. As long as you're not using margin, you can own a stock for forever and can't be forced to sell. If you believe a stock is undervalued, you having the luxury of time for the market to appreciate it and the stock to hopefully rise.
What happens when you short a stock?
If you believe the shares of a company will fall, you "borrow" shares via your broker, sell them immediately, and then hope to "return" them by buying them back at a lower price, keeping the difference.
When did Chrysler go bankrupt?
Many automakers were viewed as bankruptcy risks, and in fact, Chrysler filed bankruptcy in April 2009 and General Motors ( GM) followed a month later.
Is GM short interest?
GM has almost no short interest and has traded in a 10% range over the past two weeks. On Sunday, Robinhood significantly relaxed restrictions and only 8 stocks are now restricted. This moving target of what is allowed should erode investors trust in the Robinhood platform.
The GameStop Incident
Several unrelated posts on Reddit around the end of January 2021 brought up GameStop (GME) as a potentially viable investment opportunity. Despite reports predicting that the value of the GME stock was about to decline, users rallied around the stock and started investing in it.
Growing Media Attention
Media attention towards the situation exploded around the beginning of February. Many outlets were covering the story actively, and discussions about investing in the tech market started to ramp up.
Did Small Investors Really Win?
Over time, the price of GameStop’s stock seems to have stabilized. Many users were predicting a much more significant growth by March-April, with some claims going over $1,000. However, this is starting to seem very unlikely at this point.
Is This Trend Going to Last?
Many experts see this as something that will never happen again. It was the perfect combination of several crucial factors, and the circumstances will likely not line up like that in the future. That said, there is certainly a lot that can be learned from the incident.
The Stock Market Is in a Great Place
Tech stocks are not the only options available for investing, but they certainly have their attractive factors. The market is in a great state right now, and it’s been drawing in lots of new investors. The pandemic has been a major compounding factor for the popularity of trading as a whole.
What happens when you short a gametop stock?
It's what happened with GameStop's stock. When a stock is very heavily shorted, a rise in its price can force short sellers to get out of their bets. To do that, they have to buy the stock, which pushes the stock even higher and can create a feedback loop.
Where is Gamestop in 2021?
The Associated Press. Pedestrians pass a GameStop store on 14th Street at Union Square, Thursday, Jan. 28, 2021, in the Manhattan borough of New York. Robinhood and other online trading platforms are moving to restrict trading in GameStop and other stocks that have soared recently due to rabid buying by smaller investors.
What happens when you buy stocks on margin?
When they buy stocks “on margin,” they're using borrowed money, which can supercharge their gains and losses. With options, an investor can buy the right to buy the stock at a later date at a certain price. If the stock hits that target, investors can reap a bigger return than if they simply bought a share.
When does GameStop stock close?
Dec. 31, 2019: GameStop stock (GME) closes at $6.08. March 30 , 2020: GameStop says it will close more than 320 stores in 2020. GME closes at $3.65. Aug. 31, 2020: Ryan Cohen, a cofounder of Chewy.com, buys 9% stake in GameStop. GME closes at $6.59.
What is Gamestop story?
It is essentially the opposite of traditional investing aimed at profiting from a stock's rise. The GameStop story starts with short sellers who lost confidence in the company's future as the pandemic challenged companies without strong digital strategies.
How does short selling make money?
With short selling, investors make money if the price of a company's stock falls. If the price rises, investors need to cover their positions by buying the stock back at a higher price. The losses can be substantial.
