Business

GameStop surges more than 18per cent, other 'meme stocks' also rally

Shares in video game retailer GameStop were up 21.2per cent as volume spiked late in Monday's session putting pressure on short sellers to cover their bets as investors discussed the so-called Reddit darling stock on social media.

FILE PHOTO: GameStop logo is seen near displayed stock graph in this illustration taken February 2, 2021. REUTERS/Dado Ruvic/Illustration

02 Mar 2021 04:50AM (Updated: 02 Mar 2021 06:30AM)

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REUTERS: GameStop and other “meme stocks” mounted a late-day rally on Monday, with shares of the video game retailer climbing nearly 32per cent at one point on little apparent news.

Shares of the videogame retailer, along with other stocks favored by retail investors congregating in online forums such as Reddit’s popular WallStreetBets, have roared back in recent sessions after a wild ride in which they soared in late January and tumbled early last month.

Along with GameStop, which pared gains to close up 18.3per cent, cinema chain AMC Entertainment finished up 14.6per cent and headphone maker Koss added 13.4per cent.

At one point, GameStop, which closed at US$120.40, reached a session peak of US$133.99. Its low for the day was US$99.97.

Some analysts said a tick higher in short positioning from last week may have provided some fuel for the rally. A short squeeze - in which a flurry of buying forces bearish investors to unwind their bets against the stock - was a key catalyst behind GameStop’s late January run, when it gained as much as 1600per cent before reversing.

The number of GameStop shares shorted stood at 17.74 million, analytics firm S3 Partners said on Monday, with short interest accounting for about 32.6per cent of the float, compared with about 26per cent a week earlier, according to S3 Partners. Short interest peaked at 142per cent in early January, S3 data showed.

"We're definitely seeing some of the shorts who came on over the past week probably covering and it's helping boost today's rally," said Ihor Dusaniwsky, managing director of predictive analytics at S3. "Looking at today's price movement, I'm sure these big red numbers are going to be chasing out quite a few shorts out of their positions."

GameStop short sellers were down US$331 million in mark-to-market losses on Monday, bringing year-to-date mark-to-market losses to US$5.1 billion, according to Dusaniwsky.

More than 48 million shares in GameStop changed hands, with volume surpassing the 10-day moving average. So far the stock is up 539per cent year-to-dated. However, it was still below its Jan.28 peak of US$483.

(Reporting by Sinéad Carew and Lewis Krauskopf; Editing by Ira Iosebashvili and Dan Grebler)

Source: Reuters