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NEW YORK: GameStop Corp shares more than doubled in Wednesday afternoon trading, surprising those who thought the video game retailer’s share price would stabilize after a sharp rally and a sharp slide that overturned Wall Street in January.
The shares jumped nearly 104 percent during the session in which trading paused multiple times and then rose another 85 percent after hours. The rally started after 2:30 pm (1930 GMT).
Other alleged “stonks,” an intentional misspelling of “stocks,” favored by retailers on sites like Reddit’s WallStreetBets, also soared. AMC Entertainment Holdings Inc gained 18%, Koss Corp rallied more than 50%, and BlackBerry Corp was up nearly 9%. Shares of Canadian cannabis company Tilray Inc were up nearly 13%.
Analysts could not pin down a reason for the abrupt move. At least one dismissed a small squeeze like the one that triggered the “Reddit rally” in January, when family investors furiously bought GameStop to punish hedge funds that had bet against the retailer. Some Twitter users pointed to an activist investor’s tweet of an image of ice cream. Others cited factors including a top executive shakeup and options trading.
Shortly before 2 p.m., activist investor Ryan Cohen, a major GameStop shareholder and founder of Chewy.com, tweeted an image of a McDonald’s ice cream cone with a frog emoji. Some GameStop bulls wondered online if it was a veiled message that Cohen would fix GameStop’s business, like the fast food chain fixed its ice cream machines.
“I don’t know what ice cream means,” said Michael Pachter, analyst who covers GameStop at Wedbush Securities. “People are looking for signs.”
Others pointed to the resignation of GameStop CFO Jim Bell as the company focuses on shifting to technology-driven sales.
“GameStop announced the resignation of its CFO last night. Some may have taken this as a good sign that RC Ventures is making a difference at the company in terms of trying to accelerate the move to digital,” said Joseph Feldman, analyst at Telsey. . Advisory Group.
Stephanie Wissink, an analyst at Jefferies Research, cited her research report, noting that the CFO resigned after the company struck a deal with activist investor Ryan Cohen’s RC Ventures. His note said the chain store would likely signal a change in business model by going after “a CFO with a broader background in technology (versus retailer).”
Ihor Dusaniwsky, managing director of predictive analytics at analytics firm S3 Partners, said short hedging “was not the predominant reason for this price movement.”
“It’s mostly a long purchase with short coverage to help grease the skates,” Dusaniwsky said.
As of Tuesday, fewer than 18 million GameStop shares were short, up from more than 70 million in early January, according to S3.
Some said that options trading may have amplified the move.
Henry Schwartz, head of product intelligence at Cboe Global Markets, said the most active option contracts for GameStop were in calls around $ 50 and $ 60 strike prices, which expire on Friday. Those contracts began to pick up in volume after 11 a.m., Schwartz said, adding that when stocks began to rise after 2:30 p.m., whoever was short on those contracts may have had to buy GME shares to hedge. your position.
GameStop devotees on Reddit’s popular WallStreetBets forum expressed surprise.
“Why is GME going up?” asked another retailer on WallStreetBets. “Because we like stocks,” replied another, borrowing a phrase from well-known GameStop backer Keith Gill, known as RoaringKitty.
Another user posted: “I missed GME the first time, I will not make that mistake again. TO THE MOON.”
(Reporting by David Randall and; Additional reporting by Krystal Hu, April Joyner and Lewis Krauskopf; Written by David Gregorio; Edited by Ira Iosebashvili and Stephen Coates)
