Shares in this article
Private investors drive up the GameStop share price
Hedge funds close short positions at huge losses
Analyst: GameStop was an “idiotic short”
In an episode “MarketFoolery” from the end of January, Chris Hill and
The Motley Fool analyst Jim Gillies discuss current stock market news – including the battle between private investors and short sellers for GameStop shares.
War between hedge funds and private investors
GameStop shares have already risen 165 percent this year.
The share is currently trading at $ 51.10 (as of the closing price on February 11, 2020). At the end of January, the price of GameStop shares had temporarily risen to $ 483. Along with other stocks like AMC and Blackberry, the paper benefited from the war between hedge funds, which are selling the GameStop stock short, and private investors who have come together in the Reddit group WallStreetBets to drive such heavily shorted stocks up.
Reason for optimism at GameStop?
But presenter Chris Hill sees reason for optimism at GameStop, regardless of the private investors who wanted to push the share price up. “We talked a couple of times on this show that the recent Christmas sales results were good for GameStop. You have the founder of Chewy on the board. You have some activists there,” said Hill.
GameStop was an “idiotic short”
The Motley Fool analyst Jim Gillies even goes so far as to say that GameStop was an “idiotic short”. He questions the analytical skills of the funds that shorted the stock.
Hedge funds like Melvin Capital and Citron Research closed their short positions with huge losses due to the rise in GameStop stock.
The Wall Street Journal reported, citing people familiar with the matter, that Melvin Capital’s assets under management fell by around $ 4.5 billion to about $ 8 billion in January. Citron Research announced in a tweet at the end of January that it would no longer publish short reports and instead focus on “providing long-side multibagger opportunities to individual investors.”
According to Gillies, he also finds the fact that there have been more short-selling shares in GameStop than in GameStop shares per se, known as “naked shorting”, is interesting. Gillies points to the question of how all shortsellers want to close their position at the same time if more stocks are shorted than actually available. He finds this performance even more entertaining than what has actually happened on the floor of the stock exchange in recent weeks.
Finanzen.net editorial team
More news about GameStop Corp.
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