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Shares of GameStop more than doubled in trading Wednesday afternoon, surprising those who thought the video game retailer’s share price would stabilize after a fierce rally and sharp slide that disrupted Wall Street in January.
Stocks soared nearly 104% during the session where trading was paused multiple times and then rose another 85% after hours.
Other alleged “stonks” – an intentional misspelling of “stocks” – favored by retailers on sites like Reddit’s WallStreetBets, also skyrocketed. AMC Entertainment gained 18%, Koss rebounded more than 50% and BlackBerry was up almost 9%. Shares of Canadian cannabis company Tilray 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 small 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 a picture 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 last night the resignation of its CFO. Some may have taken this as a good sign that RC Ventures is making a difference to 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 investigative report and noted that Bell 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 mainly about long purchases with added short coverage,” Dusaniwsky said.
Fewer than 18 million GameStop shares were short as of Tuesday, 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 the $ 50 and $ 60 strike prices, which expire on Friday.
Schwartz said, adding that when the shares began to rise after 2:30 pm, whoever was short on those contracts may have had to buy GameStop shares to hedge their position.
GameStop devotees on Reddit’s popular WallStreetBets forum expressed surprise.
“Why is GME going up?” asked a retailer on WallStreetBets. “Because we like broth,” answered another.
Another user posted: “I missed GME the first time, I’m not going to make that mistake again. TO THE MOON”.
