GameStop Shares Jump Over 100%, Futures Point to More Gains

25 Feb 2021 · 3rd Party Analysis

GameStop Shares Jump Over 100%, Futures Point to More Gains


In Summary

  • GameStop rallies again as volatility in the stock returns
  • AMC sees renewed buying momentum with “meme stocks” staging a comeback

GameStop shares returned to the spotlight yesterday. In the final hour and a half of trading on Wednesday, the shares of the video game retailer doubled in value. GME stock climbed 104% and closed at $91.71 a share. GameStop is the most popular among the “meme stocks”, which are heavily favored by retail investors and individual traders who congregate on the social media site Reddit. Another “meme stock” that did well yesterday is that of the movie theater chain AMC since it went up 18.05% during the trading session yesterday.

The sharp jumps echo what the market saw in late January when retail traders short-squeezed GameStop shares and hurt hedge funds that were holding short positions in the stock. The wild GameStop trading frenzy in January pushed the stock to a high of $483. The spike resulted in a huge loss for some hedge funds, namely Melvin Capital, who reportedly lost around $4.5bn in January, or a 53% drop in its assets. At the time of GameStop’s high flying in January, Robinhood, a retail trading app, halted the purchasing of shares in the company resulting in anger within the retail community. The trading drama caught the attention of US financial regulators and on Feb 18 the House Committee on Financial Services brought in all the major players for questioning.

GameStop Won’t Stop – The Comeback

Now a week later, GameStop is staging a comeback and is again into the public eye. Trading activity in the video game retailer was up more than 500% than in a usual trading session this month as roughly 80 million shares changed hands, whereas a typical daily volume consists of around 15 million shares. The company’s stock was halted twice during its rally ahead of the closing bell on Wednesday. Shortly after the market closed, the stock was on the move again, gaining nearly 90% in after-hours trading. Before the opening of Thursday’s session, GME indicated an implied open of $168, or a jump of another 83%.

The spike in GameStop comes a day after the company announced the chief financial officer will resign in March. GameStop said it is looking for a new CFO “with the capabilities and qualifications to help accelerate GameStop’s transformation”.

Redditors on WallStreetBets, the platform where the army of individual investors is loosely organized, cheered the new volatility given that many of them have vowed not to sell their shares, but instead to hold the stock for the long-term. For some time yesterday, the entire Reddit site was down for many users and WallStreetBets was taken private due to the massive increase of comments, making the moderators’ job impossible. Reddit officials did not cite a cause of the outage and within half an hour they released a statement saying that the “systems are beginning to recover”.

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