GameStop’s 400% Rally Puts Value Above Some S&P 500 Stocks

(Bloomberg) -- GameStop Corp. soared for a fourth straight session, catapulting the former small cap’s market value beyond 14 members of the S&P 500, including Marathon Oil Corp.

The stock climbed as much as 32% before trimming gains to put its market capitalization at about $6.5 billion, more than the likes of Apache Corp. and Hanesbrands Inc. It surpassed insurance-provider Unum Group and refiner HollyFrontier Corp. on Monday.

The video-game retailer has climbed about 400% this year as traders piled into the stock after activist investor and Chewy Inc. co-founder Ryan Cohen joined its board earlier this month. The company’s market value briefly topped $10 billion on Monday, up from just $1.3 billion at the start of the year.

GameStop’s rapid ascension has made it more valuable than generic drugmaker Perrigo Co., a company that has paid investors a dividend for decades. While Grapevine, Texas-based GameStop isn’t projected to report a profit before fiscal 2023, Perrigo is expected to continue its revenue growth over the next five years after third-quarter net sales were $1.2 billion.

The stock’s surge has in part been fueled by an army of Reddit-charged day traders who used the website’s WallStreetBets forum to pump up shares and fight back against the huge levels of short interest, which has held steady at about 140% of the float, according to data compiled by S3 Partners. Short bets by Gabe Plotkin’s Melvin Capital and Andrew Left’s Citron Research have faced a reckoning in the battle with GameStop’s retail fans.

Options trading has also surged with retail investors ramping up bets on even more upside. The most active contracts were $115 calls that are set to expire on Friday, while $200 calls were the second most active contract.

Hedge fund titans Ken Griffin and Steve Cohen boosted Melvin Capital, according to a statement on Monday, injecting a total of $2.75 billion into the firm after it lost about 30% this year. The capital infusion came after Melvin Capital, which started the year with about $12.5 billion in assets, saw short bets, including GameStop, go awry, people familiar with the firm said.

(Updates share price moves throughout.)

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