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- Short sellers lost $ 664 million on Wednesday, with GameStop shares soaring 104% in the final 30 minutes of trading, S3 Partners said.
- The intraday gain of 84% of the shares on Thursday generated another $ 1.19 billion in mark-to-market losses.
- Reddit traders revived the GameStop rally this week with new hopes that the company can reinvent itself.
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Almost a month after GameStop’s jump to record highs, Reddit operators are increasing the stock of memes again. And, just like the January high, short sellers are suffering a lot.
Investors who sell the GameStop short – betting that the stock price would fall – recorded $ 664 million in mark-to-market losses, as the game retailer’s stock soared 104% at close, according to the analyst financial partner S3 Partners. The intraday gain of 84% of the shares generated another $ 1.19 billion in losses, bringing the two-day total to more than $ 1.85 billion.
To be sure, the losses are minimal compared to those fueled by the sudden increase in January. Short positions on GameStop have fallen $ 10.75 billion in the year to date on its bearish bets, according to S3. The sum includes Thursday’s intraday rally.
GameStop fired for the first time last month, when day traders joining online forums like the Wall Street Bets subreddit took stock in hopes of leading to a massive squeeze on sales. This technique involves raising the stock to a value high enough to force short sellers to cover their own positions by buying the stock. Short purchases further raise prices and form an upward spiral for stocks.
The Reddit trader phenomenon disappeared in February, with widespread sales pulling stocks from their extremely high levels. However, a last-minute hike on Wednesday reignited the shopping frenzy and led to new calls on Wall Street Bets to boost a new short squeeze.
Such a tightening is unlikely to have caused the stock’s last disruption, Ihor Dusaniwsky, managing director of predictive analytics at S3, told Insider via email.
“Although there were some purchases for the coverages caused by the large losses with the mark-to-market, they were offset by new short sellers looking for a reversal of this volatile price movement,” he said.
Shorts are also taking hold. The number of GameStop shares sold last week increased by 1.97 million, marking an increase of 15%.
The stake sold in the shares is US $ 1.42 billion, or 28.4% of the company’s tradable shares. Although it is still a large amount, it is significantly less than the almost 140% interest rate sold in early 2021.
The number of short shares could fall further if GameStop’s share price remains, said Dusaniwsky. The losses are already big enough to worry pessimistic investors, and another high may be what breaks their resolve, he added.
“Many shorts are teetering on the verge of being squeezed and a move back to the high of January is sure to push many more shorts up,” said Dusaniwsky.
GameStop was trading at $ 148.47 starting at 3 pm ET on Thursday, an increase of 660% year to date.
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Markets Insider