GameStop mania returned on March 8, spurred by Reddit users, and the influence of Ryan Cohen. The gaming retailer has chosen Cohen to lead the shift in its e-commerce business.
On March 8, the price of GameStop stock (GME) rose 41% to $194.50 — the highest price in nearly five weeks.
The rally occurred after the company announced Ryan Cohen would be leading its new committee to transition to e-commerce. Cohen is an activist, investor, and founder of Chewy Inc., an online pet food retailer.
While Cohen likely played a role, it may have had little to do with his appointment. One skeptic is Wedbush analyst Michael Pachter, who argued that the update was expected. “I didn’t see anything new there at all,” he said.
Raiders of the Hot Stock
According to Patcher, the stock’s performance was more likely influenced by GameStop being designated as a ‘Reddit Raider favorite.’ Patcher said that “it appears shorts can’t help themselves, they keep piling on.”
Despite this designation, it’s likely that Cohen is due some credit for the stock’s recent activity. On Feb. 24 he cryptically tweeted a frog emoji with a picture of a McDonald’s ice cream cone.
By the next day, GME stock had climbed to a daily high of $184.21, after trading between $40-50 since its fall from January’s spike at the beginning of last month.
After the stock resettled around $120, another tweet from Cohen on March 4, this time of the Pets.com mascot, saw the stock trading up once again.
Short on GameStop Shorts
The original GameStop frenzy was instigated by the stock being aggressively shorted by multiple hedge funds. Reddit users then took advantage by buying GME in droves.
However, the most recent rally happened as interest in shorts on the stock dropped to its lowest level in at least a year. According to data from S3 Partners, one-quarter of shares available for trading are currently sold short. This is a significant drop from a peak of more than 140% in January.
“Shorts will continue to be squeezed out of their positions as GameStop stock prices continue to trend upwards,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.
Dusaniwsky further detailed that GME shorts sellers are down nearly $6 billion in year-to-date mark-to-market losses. This also includes $609 million from March 8.
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