GameStop Corp. GME,
Shares soared on Wednesday in an apparent short tightening, but an analyst specializing in short selling information does not believe that is the case.
GameStop’s shares rose more than 60% on Wednesday – what would be its biggest percentage gain in a day, according to Dow Jones data – more than a week after short interest on the video game retailer’s stock exceeded the number outstanding shares. At the last check, more than 125 million shares were traded in the day’s session, compared to an average 52-week daily volume of 6.5 million shares.
Although GameStop has 69.8 million shares outstanding, the overdraft interest on the shares rose to 71.2 million on December 31, from 68.1 million previous shares, according to data from FactSet.
On Monday, GameStop’s shares rose 10% after it reached an agreement with investor activist RC Ventures to add three of its members to the board, and advanced less than 0.1% on Tuesday. In addition, on Monday, the company said that same-store sales increased 4.8% and digital sales increased 309%.
While noting that short sales are definitely part of the shopping spree, Ihor Dusaniwsky – head of predictive analytics at technology and financial analysis firm S3 Partners, which specializes in analyzing short sales data – said he did not agree that the price increase GameStop was the result of a squeeze.
“The change in the GME board and stronger holiday sales are causing a long-standing tsunami, which is the main driver for the price change,” said Dusaniwsky in comments by e-mail. “Although I agree that we are seeing some short positions squeezed out of their positions due to massive mark-to-market losses today, this is very similar to the chicken and egg issue – the long purchase led to short squeeze coverage or coverage short squeeze leads to a long purchase? “
Dusaniwsky believes he is the first.
“We will not see a massive drop in short shares in the next few days, more like a 10% -20% drop, which would mean 7 to 14 million covered shares, which is a far cry from the nearly 70 million shares traded this morning. ”Said the analyst. “Longs buyers are the main driving force behind GME’s share price. “
GameStop shares have soared over 500% in the past 12 months, compared to a 16% gain on the S&P 500 SPX index,
and a 42% increase in the Nasdaq Composite Index COMP,