GameStop One-Week Share Price
GameStop’s shares were one of the most actively traded stocks in premarket trading on Thursday as amateur traders continue to drive it higher, while collectively taking on some of Wall Street’s most sophisticated investors. They’ve piled into trades around companies — big and small — that other investors had written off, pushing stock prices to stratospheric levels.
The main focus is GameStop, the troubled video game retailer. Its stock is up about 40 percent in premarket trading, a much more moderate gain after trading platforms placed restrictions on the stock. But it’s already up 1,700 percent this month, including Wednesday’s climb of 135 percent, that has given the company an astonishing market valuation of $24 billion. AMC Entertainment rose 300 percent on Wednesday, and BlackBerry is up more than 275 percent this month.
Billions of shares were traded in Naked Brand, a clothing manufacturer, on Wednesday. Its share price rose from 39 cents to $1.38, a 252 percent gain. It was again one of the most traded stocks in premarket on Thursday, rising 110 percent, after being cited on a Reddit forum. The company had been trying to orchestrate its own turnaround and escape “penny stock” status to avoid being delisted.
The surging shares have become detached from the factors that traditionally help establish a company’s value to investors — like growth potential or profits. But the traders who are piling in probably aren’t thinking about those fundamentals.
Instead, they are part of a frenzy that appears to have originated on a Reddit message board, WallStreetBets, a community known for irreverent market discussions, and on messaging platforms like Discord. (One comment from WallStreetBets read, “PUT YOUR LIFTOFF DIAPERS ON ITS ABOUT TO START.”) Both Tesla’s Elon Musk and the billionaire tech investor Chamath Palihapitiya have encouraged the crowd via Twitter.
Egged on by the message boards, these traders are rushing to buy options contracts that will profit from a rise in the share price. And that trading can create a feedback loop that drives the underlying share prices higher, as brokerage firms that sell the options have to buy shares as a hedge.
As more traders snap up options, the brokers have to buy up more shares, driving the astounding rise in the company’s stock prices. GameStop began the year at $19 and ended trading on Wednesday at nearly $348.
Another reason the shares are rising so quickly is that, until recently, they were heavily targeted by big investors who bet the stocks would decline by taking on short positions. As the shares surge, the shorters also have to buy the stock in order to cut their losses, and that triggers a so-called short squeeze — a sudden spike in a share’s value.
Gabe Plotkin, the hedge fund trader whose Melvin Capital was shorting GameStop, confirmed to CNBC on Wednesday that he had exited his position after having to raise a $2.75 billion bailout from Citadel and his former boss, Steve Cohen, amid the short squeeze. Mr. Plotkin’s other short bets appear to be suffering, possibly because they are being targeted by traders — Melvin and Mr. Plotkin are often pilloried on the message boards.
The Securities and Exchange Commission said Wednesday it is “actively monitoring” the volatile trading.
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January 27, 2021 at 08:34PM
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GameStop’s surge continues, as small traders band together to push up stocks. - The New York Times
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