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Gamestop Shorts Lose $1.4 Billion in Meme Revival

May 13, 2024
minute read

The meme-stock witnessed an extraordinary surge of up to 119% during a tumultuous opening session on Monday, characterized by a flurry of trading activities that prompted at least eight halts for volatility within the initial hour.

As the month progresses, the stock has seen an impressive 185% increase, leading to substantial mark-to-market losses amounting to $1.4 billion for short-sellers, according to data from S3 Partners.

By 11:20 a.m. in New York, shares of the Grapevine, Texas-based company had moderated their Monday gains to 65%.

The phenomenon of meme stocks captivated the public's attention in 2021, as affluent investors infused the stock market with capital and wagered against short-selling hedge funds. This frenzy inflicted significant losses on entities like Gabe Plotkin’s Melvin Capital Management, which eventually closed its doors, while yielding substantial profits for early entrants into the frenzy, before stocks such as GameStop experienced a sharp decline.

Short sellers who had positioned themselves against GameStop had enjoyed success during the initial four months of the year, underscoring the volatile nature of meme stocks, which can swiftly erode paper gains. According to data from S3, skeptics had accrued approximately $400 million in gains from January to April, only to find themselves in the negative territory overall by Monday morning.

The percentage of GameStop shares sold short in relation to those available for trading has remained relatively stable at around 24%, as reported by financial analytics firm S3 Partners. While this figure is elevated compared to the norm for most companies, it is significantly lower than the staggering levels of 140% observed prior to the 2021 frenzy.

Over the past week, the cost associated with betting against the company has surged alongside the rise in share prices, with borrowing expenses reaching an annual financing fee exceeding 10%, according to data from S3.

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Eric Ng
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Cathy Hills
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