GameStop, AMC, and other Reddit favorites climb as day traders look to reignite momentum

GameStop Clerk
A customer laughs with a clerk as he purchases a copy of the video game “Grand Theft Auto IV” at a GameStop store in New York

  • GameStop, AMC, and other Reddit-favorite stocks gained on Monday as day traders aimed to spark rallies similar to those seen in January.
  • The group of previously unloved stocks has fluctuated in recent sessions as bullish momentum locks horns with profit-taking.
  • The day traders lack the element of surprise they enjoyed earlier in the year, and regulators are investigating whether Reddit posts fueling the previous surges constituted manipulation.
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GameStop, AMC Entertainment, and other so-called meme stocks gained on Monday as retail investors looked to fuel new rallies.

The video-game retailer rose as much as 10.1%. AMC climbed 13.7%. BlackBerry and Express swung 5.2% and 7.4% higher, respectively.

The stocks have traded with elevated volatility in recent sessions as day traders congregating online try to repeat the surges seen at the start of the year. Recent posts on r/wallstreetbets and other trading forums praising the upswing garnered thousands of comments and votes of approval. And while the companies trade well below their January highs, they still boast huge year-to-date gains.

The gains follow broad selling across the Reddit favorites. The stocks tumbled in Friday trading after rising the session prior, underscoring the back-and-forth action seen since January’s extraordinary rallies.

Retail investors looking to lift prices again face a tougher challenge. The Reddit-savvy traders had the element of surprise when they first bid up shares, and their ability to shock the market establishment quickly publicized the trade. The stocks’ unusually high short interest also exacerbated the rallies as bearish investors had to buy shares to cover their souring bets.

Those surges are old news now, and Wall Street has caught on to the Reddit traders’ antics. Hedge funds started tracking posts on relevant forums to monitor which stocks day traders could target next.

Separately, regulators are looking into the January price action to determine its legality. While the Reddit crowd has repeatedly indicated they simply “like the stock,” those warier of the sudden climbs suggest the online communication could qualify as market manipulation. 

A new report suggests bots also played a significant role in driving hype around the trade. Fake accounts on major social media platforms amplified calls to buy and hold shares of GameStop and other relevant stocks, Reuters reported, citing analysis by cybersecurity company PiiQ Media. Still, it’s unclear how much of an impact the bots had on the rallies.

Lawmakers have already taken steps to better understand the market phenomenon. The House Financial Services Committee held a hearing in February on the matter, and the Senate Banking Committee is poised to do so. 

GameStop closed at $101.74 per share on Friday, up about 428% year-to-date.

AMC closed at $8.01, up 270% year-to-date.

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GameStop short-sellers have lost $1.9 billion in just 2 days amid the stock’s latest spike

GameStop
  • Short sellers lost $664 million on Wednesday as GameStop shares spiked 104% in the final 30 minutes of trading, S3 Partners said.
  • The stock’s 84% intraday gain on Thursday fueled another $1.19 billion in mark-to-market losses.
  • Reddit traders revived the GameStop rally this week on new hopes the company can reinvent itself.
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Nearly one month after GameStop’s leap to record highs, Reddit traders are boosting the meme stock all over again. And just like in the January rally, short-sellers are hurting big.

Investors selling GameStop short – betting the stock price would decline – posted $664 million in mark-to-market losses as shares of the gaming retailer rocketed 104% into the close, according to financial analytics firm S3 Partners. The stock’s 84% intraday gain fueled another $1.19 billion in losses, bringing the two-day total to more than $1.85 billion.

To be sure, the losses pale in comparison to those fueled by the January surge. GameStop shorts are down $10.75 billion year-to-date on their bearish bets, according to S3. The sum includes Thursday’s intraday rally.

GameStop first spiked higher last month as day traders uniting in online forums like the Wall Street Bets subreddit scooped up shares in hopes of driving a massive short squeeze. Such a technique involves driving shares high enough to force short-sellers to cover their own positions by buying the stock. Short-seller purchases further lift prices and form an upward spiral for the stock.

The Reddit-trader phenomenon faded through February as widespread selling pulled shares from their extremely elevated levels. Yet a last-minute rally on Wednesday reignited the buying frenzy and prompted new calls on Wall Street Bets to drive a new short squeeze.

It’s unlikely such a squeeze prompted the stock’s latest tear, Ihor Dusaniwsky, managing director of predictive analytics at S3, told Insider in an email.

“While there were some buy-to-covers brought about by the large mark-to-market losses, they were offset by new short sellers looking for a pullback from this volatile price move,” he said.

The shorts are holding their ground, too. The number of GameStop shares shorted over the past week rose by 1.97 million, marking an increase of 15%.

Short interest in the stock is $1.42 billion, or 28.4% of the company’s tradeable shares. While still a large sum, that’s down significantly from the nearly 140% short interest seen earlier in 2021.

The number of shares sold short can decline even further if GameStop’s stock price holds, Dusaniwsky said. Losses are already big enough to concern bearish investors, and another rally could be what breaks their resolve, he added. 

“Many shorts are teetering on the edge of being squeezed out and a move back towards January’s high will certainly push many more shorts over the cliff,” Dusaniwsky said.

GameStop traded at $148.47 as of 3 p.m. ET Thursday, up 660% year-to-date.

Read more: GOLDMAN SACHS: These 40 heavily shorted stocks could be the next GameStop if retail traders target them – and the group has already nearly doubled over the past 3 months

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Former SEC Chair Jay Clayton says GameStop trading was not a pump-and-dump scheme and praises transparency from ‘Mr. Kitty’

GameStop millionaire Roaring Kitty
GameStop millionaire Roaring Kitty


Former SEC chairman Jay Clayton told CNBC on Friday that trading activity during the GameStop market frenzy was not a “pump and dump scheme,” and Thursday’s hearing demonstrated transparency from social media investors.

Clayton says the SEC will likely take a look at whether there was coordinated behavior to manipulate GameStop’s stock price that soared 1,022% during the January rally,  but “the quick answer is that “no pump and dump scheme was present. 

“The overall participation in this, it was fairly transparent what was going on here,” Clayton said. “I must admit to being entertained by Mr. Kitty. You saw that people were very transparent about what they were doing and why they were doing it, which was fairly interesting.” 

During Thursday’s hearing, Keith Gill, also known as “Roaring Kitty”, emphasized that his reasoning for buying GameStop stock and sharing his position was purely based on his belief that the company was dramatically undervalued, and he was clear explaining his fundamental case for buying GameStop to his social media followers. 

Gill told the House Financial Services Committee that he still likes GameStop’s stock and he would buy it at its current price of roughly $43. 

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Discord bans r/WallStreetBets server over hate speech amid the group driving GameStop shares through the roof

WallStreetBets
  • Discord banned r/WallStreetBets on Wednesday for repeatedly allowing hate speech.
  • The move came amid the online group fueling a massive rally of GameStop, AMC, and Nokia shares.
  • Discord’s ban coincided with the group having issues with its Reddit forum, briefly knocking it offline.
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Discord said on Wednesday it had banned the r/WallStreetBets server for repeatedly violating its policies against hate speech.

“The WallStreetBets server has been on our Trust & Safety team’s radar for some time due to occasional content that violates our Community Guidelines, including hate speech, glorifying violence, and spreading misinformation. Over the past few months, we have issued multiple warnings to the server admin,” a Discord spokesperson told Insider.

“Today, we decided to remove the server and its owner from Discord for continuing to allow hateful and discriminatory content after repeated warnings,” they said.

The move came as Reddit’s r/WallStreetBets, an overlapping online community, has been fueling massive volatility in the stock market over the past several days by driving up share prices for GameStop, AMC Theaters, and Nokia.

While the r/WallStreetBets community originated on Reddit, its members have set up a “server” on the group-chat platform Discord where they also discuss stock-trading plans.

Discord’s ban came as the r/WallStreetBets subreddit had been experiencing on-and-off technical issues – including becoming invite-only for around an hour, according to The Verge – as new users flocked to it. The timing of the ban may have briefly made it more difficult for members to discuss trades.

Moderators of the Reddit community slammed the move.

“We’re suffering from success and our Discord was the first casualty. You know as well as I do that if you gather 250k people in one spot someone is going to say something that makes you look bad. That room was golden and the people that run it are awesome,” they said in a Reddit post Wednesday.

“Discord did us dirty and I am not impressed with them destroying our community instead of stepping in with the wrench we may have needed to fix things, especially after we got over 1,000 server boosts. That is pretty unethical,” they said.

But Discord said its decision wasn’t connected to the group’s discussion of trading activity.

“To be clear, we did not ban this server due to financial fraud related to GameStop or other stocks. Discord welcomes a broad variety of personal finance discussions, from investment clubs and day traders to college students and professional financial advisors,” the spokesperson said. “We are monitoring this situation and in the event there are allegations of illegal activities, we will cooperate with authorities as appropriate.”

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital’s short positions

The trading activity generated in large part by the r/WallStreetBets community has wreaked havoc on traditional Wall Street firms, causing GameStop short-sellers alone to lose more than $5 billion on their positions.

The stock market volatility caused the White House to chime in Wednesday to say it’s “monitoring the situation.”

“Our team, our economic team, including [Treasury] Secretary [Janet] Yellen and others, are monitoring the situation,” White House Press Secretary Jen Psaki said at a press conference. “It’s a good reminder though that the stock market isn’t the only measure of the health of our economy. It doesn’t reflect how middle and working-class families are doing.”

Financial regulators and the companies that operate the financial markets have also been keeping a close eye on the situation.

Nasdaq CEO Adena Friedman told CNBC Wednesday that the exchange monitors social media chatter, and will halt trading if they match the chatter with unusual activity in a stock. 

Brokerage firm Ameritrade also restricted trading in light of the massive volume sparked by r/WallStreetBets.

“In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC, and other securities. We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors,” Ameritrade said in a statement Wednesday.

GameStop, AMC, and Nokia were all down slightly in after-hours trading.

Read more: This GameStop thing isn’t funny; it’s stupid

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