- Short sellers lost $ 664 million on Wednesday as GameStop shares soared 104% in the last 30 minutes of trading, S3 Partners said.
- The stock’s 84% intraday gain on Thursday drove another $ 1.19 billion in market value losses.
- Reddit marketers revived the GameStop rally this week with new hopes that the company can reinvent itself.
- Sign up here for our daily newsletter, 10 things before the opening bell.
Almost a month after GameStop’s jump to record highs, Reddit operators are boosting meme stock again. And like the January rally, short sellers are suffering a lot.
Investors who were shorting GameStop, betting the share price would decline, posted a market value loss of $ 664 million as the games retailer’s shares soared 104% at the close, according to the firm. financial analysis S3 Partners. The stock’s 84% intraday gain generated losses of another $ 1.19 billion, bringing the two-day total to more than $ 1.85 billion.
The losses certainly pale in comparison to those driven by January’s surge. GameStop shorts are down $ 10.75 billion so far this year on their bearish bets, according to S3. The sum includes the intraday rally on Thursday.
GameStop first rose last month when daily traders who joined on online forums like the Wall Street Bets subreddit picked up stocks in hopes of generating a small massive contraction. This technique involves pushing stocks high enough to force short sellers to hedge their own positions by buying stocks. Short-term purchases drive prices even higher and spiral up stocks.
The Reddit trader phenomenon waned throughout February as the sell-off pulled the stock out of extremely high levels. However, a last-minute rally on Wednesday reignited the buying frenzy and prompted fresh calls to Wall Street Bets to push for a new short squeeze.
Such compression is unlikely to have caused the latest tear in the stock, Ihor Dusaniwsky, managing director of predictive analytics at S3, told Insider in an email.
“While there were some hedged purchases triggered by large losses in market value, they were offset by new short sellers looking to reverse this volatile price movement,” he said.
The shorts also stand firm. The number of GameStop shares shorted over the past week increased by 1.97 million, representing an increase of 15%.
The short interest on the stock is $ 1.42 billion, or 28.4% of the company’s marketable shares. While that’s still a large sum, that’s significantly less than the nearly 140% short interest seen in early 2021.
The number of shares sold short may decline further if GameStop’s share price holds, Dusaniwsky said. The losses are already big enough to worry bearish investors, and another rally could be what breaks their resolve, he added.
“Many shorts are on the verge of being squeezed and a move towards the January high will certainly push many more shorts off the cliff,” Dusaniwsky said.
GameStop was trading at $ 148.47 as of 3 p.m. ET Thursday, a 660% increase to date.
Read more: GOLDMAN SACHS: These 40 very short stocks could be the next GameStop if retailers target them, and the group has almost doubled in the last 3 months already.