Lucas Jackson / Reuters
- GameStop short sellers lost $ 3.3 billion in stock bets in 2021, S3 Partners said.
- Losses totaled about $ 1.6 billion on Friday alone, with stocks rising 51%.
- GameStop has skyrocketed as Reddit traders take bullish momentum to extraordinary levels.
- Watch the GameStop trade live here.
Investors betting against GameStop and the army of upbeat retail traders have already lost billions in 2021.
Mark-to-market losses for GameStop’s year-to-date short positions reached $ 3.3 billion at the close of Friday’s trades, according to data from financial analyst S3 Partners. Losses totaled nearly $ 1.6 billion on Friday alone, with stocks soaring 51% higher at the close.
GameStop’s stock continued to rise, with Reddit users and day traders extending the unusual momentum trade in its third week. The company’s stock initially jumped on Jan. 11, after it agreed with an activist investor to add three new directors to the board. The day’s earnings attracted several retailers, including members of the popular subreddit WallStreetBets.
Online posts urging other investors to join the deal generated a huge upward momentum for GameStop. The shares were traded 115% higher as of 10:40 am ET on Monday and are over 500% in the year.
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While some think the gains were fueled by a massive tightening in short selling, demand for short stocks remains strong. About 72 million shares – or 140% of GameStop’s float – were shorted on Friday, according to S3. In the past seven days, the number of shares sold has risen 883,000, although shares have soared.
“There has been a queue of new short sellers wanting to get short exposure on GameStop after their recent run,” Ihor Dusaniwsky, managing director of predictive analytics at S3, told Insider, adding that brokers were unable to meet the demand for shares to short sell.
Short sellers and Wall Street have struggled to understand the retail merchant phenomenon. Only one company, Telsey Advisory Group, has downgraded the stock since its rise earlier this month. Street’s average target price is $ 11.96, which implies a broad expectation of an 81% crash.
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Andrew Left of Citron Research, one of GameStop’s best-selling companies on Wall Street, said on Friday he would not comment further on the shares. Left posted a video on Thursday criticizing bullish traders and arguing that the stock would soon drop to $ 20. WallStreetBets members berated Left with derogatory memes and comments.
The short seller said on Friday that a “furious crowd” of online traders harassed him and tried to hack into his Twitter account, prompting him to end his comments on the shares.
The left kept its thesis short – but what started out as a moderate short grip has evolved into a “vice-grip” on those who bet against GameStop, said Dusaniwsky. He added that the prolonged rise in the stock would force the sellers to reconsider their confidence in their position and would likely kill a large number of GameStop bears.
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