GME is up more than 750% for 2021.
GameStop’s (GME) stock price on April 1 was $3.25. At it’s peak in pre-market trading this morning, GME traded at nearly $380 per share, bringing it’s market cap above $22 billion.
GameStop has not, as far as anyone knows, completed the greatest comeback story in the history of free enterprise. The company is actually closing more stores than the 300 stores it expected at the onset of the pandemic. But one thing has changed for the better: When trading ended on Monday, GameStop stock had hit $76.79—four times its price to end 2020 and 23 times its price from the early days of the pandemic. The stock then jumped to $96.67 on Tuesday morning before dropping into the 80s as its upward run continued onward. At market close yesterday GME was up to $146 per share, but it doesn’t stop there. The stock traded as high as $380 per share in premarket trading this morning, stacking on a more than 100% gain before the market opened.
GameStop’s nearly vertical surge over the past week has come as retail traders, many of whom have documented their moves on the social media site Reddit, have piled into the stock and call options. The spiking share price has helped to create a stock squeeze, where shorts and options dealers are forced to buy shares of a rising stock to cover their positions, resulting in a feedback loop that drives the stock even higher.
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The Reddit Wall Street speculation community, r/WallStreetBets has more than 2 million members, hundreds of thousands of whom are online at any given time, to say nothing of lurkers. In September, an enterprising subredditor had posted a seven-point treatise titled “Bankrupting Institutional Investors for Dummies, ft GameStop.” The subredditor noted the stock already had a significant short exposure and predicted that short sellers would be forced to abandon their positions and, in buying back their stocks, drive the price up. R/WallStreetBets users delighted in the idea and took it as a chance to egg one another on.
Hype around GME continued bubbling up around r/WallStreetBets over the ensuing weeks, from posters who apparently saw it all along as a profit opportunity. The stock’s boom has made some of them big money.
Redditors within the group are taking pride in their victory against short-sellers, who are by definition rooting for shareholders and companies to suffer. At the end of November, the subreddit ascertained that hedge fund Melvin Capital Management was shorting GameStop, and the community rallied with fury against the New York–based fund.
“When these boomers made their bet, GME wasn’t a big thing on WSB yet,” one poster wrote. “I don’t feel bad at all taking money from these rich greedy hedge fund managers.”
“They’re not even playing with their own money,” another wrote.
“I’m an old millennial. I’m tired of getting screwed by the globalist elites,” said another. “This isn’t left or right republican or Democrat. It’s the 1% versus everyone else.”
Whether for profit or ideological reasons, the Redditors are winning. They’ve bought the hell out of GME, and short sellers have begun to abandon their positions en masse, leading the stock to go up even more as they buy it back. It’s a classic short squeeze. Melvin Capital was down 15 percent for the year on Jan. 22, according to the Wall Street Journal, leading the fund to take a $2.75 billion rescue package from other rich investors. On that day alone, short sellers against GameStop lost $1.6 billion, financial analytics firm S3 Partners said.
The GME saga isn’t over yet and there’s no telling what comes next. But one thing is certain– the tale of GameStop’s stock price and the central role of a subreddit will be taught in business schools one day, no matter how it ends.
Some redditors on r/wallstreetbets are urging members to hold strong on their long GME positions and avoid distractions from others within the group who are attempting to attract focus to other ticker symbols such as AMC Entertainment Holdings (AMC), Express, Inc. (EXPR) and BlackBerry Ltd (BB), which are all markedly up.
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