GameStop Corp’s wild ride. continued in the pre-market trades, as shares fell after reports that Melvin Capital had closed its short position.
The shares rose 66% to $ 245 at 6:37 am New York time, having more than doubled since the last close of $ 147.98. This followed the 93% increase on Tuesday, which means that GameStop has increased more than eight times this month, at a dizzying high fueled by Reddit-loaded day traders.
After a frantic session on Tuesday, stock gains reached new extremes outside normal hours after Tesla Inc. boss Musk tweeted a link to a Reddit topic about the company. Famous fund manager Michael Burry warned that the bullish maniac got out of control, calling the bullish stock “abnormal, insane and dangerous”. Gabe Plotkin’s Melvin Capital closed its short position on Tuesday afternoon, CNBC’s Squawk Box reported.
Another note of caution was provided on Wednesday by Bank of America Corp. analysts. By raising their target price from $ 1.60 to $ 10 to reflect the recent increase in shares, they noticed that GameStop is in “a weaker place, not a stronger place” and reiterated its recommendation of inferior performance.
“While it is difficult to know how much very high uncovered interest and retail ownership can continue to put upward pressure on stocks, we believe the fundamentals will again influence the valuation,” wrote analysts led by Curtis Nagle in a note. “We remain skeptical about the potential for recovery.”
The euphoria born in the day-trader’s chat rooms has turned GameStop into the largest stock of stories in the retail era, and its unlikely increase is an emblem of the newly discovered power of individual investors. At the same time, it has become a major headache for institutional investors who bet it would fall. An epic squeeze lifting the stocks sparked a search for other companies that may be just as vulnerable, with Express Inc., Bed Bath & Beyond Inc. and AMC Entertainment Holdings Inc. among the stocks growing in the pre-market on Wednesday.
GameStop Stocks almost always plummet after earnings reports
GameStop Is Rage Against the Financial Machine: John Authers
– With the help of Jan-Patrick Barnert
(Updates with Melvin closing the short in the second and third paragraphs, Bank of America’s target price in the fourth)