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GameStop Corp. shares skyrocketed to its highest level in more than five years on Wednesday, with sellers betting against stocks struggling to get out.
Shares in video game retailer Grapevine, Texas, rose 94% to an intraday high of $ 38.65 each. The last time the shares were traded at this level was in November 2015.
| Ticker | Safety | Last | change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 31.45 | +11.51 | + 57.72% |
The peak appears to have been driven by a short coverage rally triggered by a deal the company made with activist investor RC Ventures over the addition of three board members.
The interest sold last month reached 138% of the outstanding shares, according to data from FactSet. Short sellers borrow shares to sell them in the hope of repurchasing them at a lower price in the future.
The new directors, including Ryan Cohen, founder of RC Ventures and online pet food provider Chewy, have extensive experience in e-commerce, online marketing, finance and strategic planning.
In September, RC Ventures bought 6.5 million shares of GameStop to increase its stake to 9.98% with the aim of transforming the company into a major e-commerce player that sells a wide variety of goods with fast shipping.
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The attempt to reverse GameStop’s business comes at a critical moment for the company, which suffered from the closing of stores in the midst of the COVID-19 pandemic, at a time when more users were already buying their video games online.
GameStop on Monday reported comparable sales for the nine weeks through January 2, up 4.8% from the previous year, driven by a 309% increase in online revenue. Total sales fell 3.1%, as the number of stores decreased 11% during the pandemic.
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GameStop expects demand for the new Microsoft Xbox and Sony PlayStation game systems to boost sales by 2021, as supply chain restrictions ease.
The shares were up 5.89% this year through Tuesday, outpacing the 1.2% gain from the S&P 500.