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.
Why did GameStop’s stock rise so fast?
And now you know the answer to the big question, “why did GameStop stock rise so fast?” 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.
Should you take profits on GameStop stock?
Thus, Nagle argues that the game retailer's share price could plunge as much as 97% to $10. With so much potential downside, those who have profited from GameStop's ascent may want to consider taking profits.
Is GameStop one of the most shorted stocks?
That caught the eye of Andrew Left of Citron Research, a short-selling guru who recommended in a Jan. 21 report that Wall Streeters bet against the stock. By Friday, GameStop had a short interest of 102 percent of its outstanding shares, making it one of the most shorted stocks on the market.
Why is GameStop a meme stock?
The r/WallStreetBets community, which has more than 2 million subscribers, has turned GameStop into a meme stock —it has value because a small number of people decided it would be fun (and potentially profitable) to pretend it had value, other people wanted in on the fun (and profit), and suddenly it had real value. Value is weird!
What happens when you short a company?
But if you think a company is going to tank, you can “short” that firm—basically, you borrow a number of shares in that company at the current price, then sell them in the hopes that you can then buy the same number of shares again later for a lower price, give those shares back to the lender by an agreed-upon time, and pocket the difference.
Is GameStop a mall?
Not only does high-speed Internet make it possible for gamers to download the latest titles directly to their consoles, rendering much of GameStop’s business model archaic, but the chain is also a heavily mall-based business, and malls are, well, not doing great. GameStop has held on in part thanks to its business in used-games (which are cheaper, and which you can’t simply download) and because of high demand for the new PlayStation 5 and Xbox Series X/S consoles (for which GameStop is one of only a handful of approved retailers). That Ryan Cohen, co-founder of e-commerce darling Chewy, joined the board this month is also a reason for optimism. 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.
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.
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 much is GameStop stock worth in 2021?
GameStop stock rose from $17.25 on the first trading day of 2021 to $347.51 earlier this week. That’s an increase of about 1,900%.
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:
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.
Is GameStop a small company?
In addition, GameStop is by all accounts a small company when you look at its sales and earnings numbers. The retailer of video games is also struggling financially. Sales are falling at a 30% annual rate.
Can small time retail investors outduel big institutions?
Rarely can small-time retail investors outduel the big institutions. They just don’t have the firepower in terms of capital, technology, and other resources. This time, however, the little guys seem to have won – at least for a brief moment.
How much did GameStop lose in 2019?
GameStop lost $471 million in 2019. Moreover, fourth-quarter fiscal 2020 net sales fell by only 3% from year-ago levels.
Is GameStop stock in single digits?
GameStop 's ( NYSE:GME ) stock price recovery from single-digit levels began with a short squeeze inspired by Reddit's WallStreetBets blog site. Outsized enthusiasm for the stock has offered a needed lifeline to GameStop, enabling it to raise capital and revive its ailing retailing business.
Does GameStop take a cut from Xbox?
Yes, it can aggregate available games from each of the manufacturers onto its website. For example, Microsoft ( NASDAQ:MSFT) has agreed to give GameStop a cut for each Xbox game sold on its site. Still, investors have little visibility on the percentage GameStop receives.
Does GameStop have a name?
Moreover, one can say the same for its core game download business. Yes, it can aggregate available games from each of the manufacturers onto its website.
Is GameStop a one stop shop?
The retailer previously built a competitive advantage as a one-stop-shop for all things gaming, especially electronic gaming. Customers could visit GameStop to find the latest video games, get refurbished hardware, and buy, sell, or trade games.
Is GameStop a digital retailer?
GameStop has used its capital to transform itself primarily into a "digital-first, omnichannel retailer.". Also, it has replaced much of its previous executive management team, removing both the CEO and CFO. Experienced internet retail leaders such as incoming chairman of the board Ryan Cohen has joined the company.
Who is the CEO of GameStop?
The company also declined to provide guidance for 2021. GameStop CEO George Sherman tried to highlight some positives in the earnings report, saying, "I am proud of how our entire organization came together in 2020 to adapt to the challenging pandemic environment, effectively serve our customers' demand for gaming and entertainment products, ...
Who is the chief operating officer of GameStop?
Following the release of the earnings report, GameStop announced that Jenna Owens (previously Amazon's director and general manager for distribution and multi-channel fulfillment) has been hired to be GameStop's new chief operating officer.
Is GameStop stock still high?
So yes, GameStop stock is still high--$181.75 per share at the end of Tuesday--but that's most likely still a result of other factors, not just the performance of the business. In after-hours trading, the share price rose to $197 before dropping to $161 at the time of this writing.
Is GameStop stock higher than 2021?
Following the Reddit-influenced Wall Street battle over GameStop's share value earlier this year, GameStop stock currently stands nearly 10 times higher than where it started in 2021.
How much has GameStop increased in 2020?
GameStop’s weekly page views per million users spiked over the last several months, peaking at a 409% increase compared to January 2020. Today, it’s sitting at a 118% increase. These are impressive numbers for a company that was otherwise widely seen as in the midst of a long, slow decline.
Did GameStop make a big announcement?
So, no , GameStop did not make any big announcement or big change that would cause its stock to spike or rapidly climb the way it did today and in the past week. The rally was driven almost entirely by a community on Reddit called r/wallstreetbets.
Is GameStop a good company?
By most metrics, GameStop is not a company most people should invest in. For years now the company has been in a death spiral brought on by a shift in the way consumers purchase and play video games. Just like the advent and growth of streaming services has caused many to lament the end of the DVD, the rise of digital storefronts has led to a decline in the purchasing of physical game copies.
Why did AMC stock spike?
Earlier this week, AMC’s stock spiked after the company announced it would avoid bankruptcy with new financing. In normal times, the news wouldn’t have necessarily boosted the shares — the financing means AMC is going deeper into debt and will water down its existing shareholders. This time, it has been different.
Why do market makers buy more shares?
These options force so-called market makers — usually big financial firms — to buy more shares themselves in order to hedge their own exposure. A vicious cycle of buying can result.
What does Gamestonk mean?
Users had rejoiced Tuesday evening when Tesla CEO Elon Musk tweeted “GameStonk,” an acknowledgment of a meme that they use to attack the stock. Likewise, the Winkelvoss twins have been firing off pro-squeeze tweets and claiming “The inmates are running the asylum.”.
Who bought Gamestop call options?
The short squeeze has even caught the attention of Tesla CEO Elon Musk and venture capitalist Chamath Palihapitiya. On Tuesday, Musk sent his 43 million Twitter followers a link to a popular Reddit message board that many traders have used to hype GameStop's stock. Palihapitiya, meanwhile, went so far as to say on Twitter that he bought GameStop call options, which is essentially a leveraged bet that its stock price would continue to rise.
Is GameStop up in 2021?
GameStop's shares are now up nearly 1,700% so far in 2021 -- and it's still January. An epic short squeeze is believed to be fueling the rally -- one led by an army of individual traders that are using social media sites like Reddit and Twitter to coordinate their strikes against short-sellers.
