GameStop rally extends to 35% as Reddit traders push new meme-stock feeding frenzy

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Wall Street Bets users have driven up the price of GameStop stock

  • GameStop has surged 35% over the past two-days amid a renewed hype from Reddit traders.
  • The video-game retailer has seen a resurgence in both price and Reddit activity following a 2-month consolidation in the stock.
  • Short-sellers are likely aiding the rally as GameStop short interest remains elevated at about 21%.
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GameStop has surged as much as 35% over the past two days amid a renewed resurgence of chatter about the video game retailer on Reddit’s Wall Street Bets forum.

The stock has consolidated sideways over the past two-months, but shares have moved to the upside in recent days alongside its “meme stock” sidekick AMC Entertainment, which is up 49% since the start of the week.

The move higher in GameStop is causing short-sellers more pain, as short interest in the company has remained elevated even after hedge fund Melvin Capital capitulated out of its bet against the company. According to data from MarketBeat, 21% of GameStop’s share float is sold short, and month-to-date, GameStop short-sellers have lost $442 million, according to data from ORTEX.

GameStop has capitalized on its epic year-to-date share-price rally of more than 1,100%. The company raised more than $550 million via an at-the-market share offering, retired debt, and has implemented a turnaround strategy led by Chewy.com co-founder Ryan Cohen.

That turnaroun plan was on full display on Tuesday after the company revealed that it is building an NFT platform on the Ethereum blockchain.

“gamestop? GAME ON!!!!” said a Wall Street Bets post in reaction to the recent rise in shares of GameStop. The post had about 18,000 upvotes as of Wednesday morning.

Shares of GameStop are still about 50% below its record intra-day high of $483 reached during the wild January short-squeeze.

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GameStop CEO George Sherman lost out on nearly $100 million in stock awards after underperforming

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GameStop CEO George Sherman has forfeited around $100 million worth of stock.

  • GameStop CEO George Sherman forfeited $98 million of stock after underperforming.
  • Merchandising chief Chris Homeister also gave up $20 million of stock.
  • Activist investor Ryan Cohen is overhauling the company’s board and strategy.
  • See more stories on Insider’s business page.

GameStop CEO George Sherman lost out on nearly $100 million of stock this week after failing to meet his performance targets, a SEC filing revealed on Wednesday.

Sherman forfeited roughly 587,000 shares, worth $98 million at GameStop’s closing stock price of $167 on Wednesday. He was granted the restricted shares as an incentive in April 2019, shortly after he was appointed CEO.

The shares were worth as little as $10 million at the start of this year, but would have fetched $284 million during the Reddit-fueled short squeeze in January. That wide range of value underscores how much GameStop’s stock price has whipsawed this year.

Sherman still boasts 1.8 million shares in total, worth $295 million as of Wednesday’s close.

GameStop’s chief merchandising officer, Chris Homeister, also forfeited 119,000 shares this week after underperforming, another SEC filing shows. Those shares were worth almost $20 million as of Wednesday’s close. Homeister still lays claim to 388,000 shares, worth $84 million at the last count.

Sherman, who only joined the company two years ago, could be out of a job soon. GameStop is hunting for a new CEO as it prepares to revamp its business and focus more on e-commerce, Reuters reported this week. Chewy cofounder Ryan Cohen, an activist investor who took a stake in the video-games retailer last fall, has overhauled its board of directors and looks set to become its chairman this summer.

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Philosopher Slavoj Žižek says Wall Street Bets’ GameStop squeeze was revolutionary because of how it focused on deliberately creating chaos, rather than anything fundamental

Slavoj Zizek
  • Slavoj Žižek says the GameStop short squeeze was revolutionary because it didn’t focus on fundamentals.
  • Žižek is a political philosopher who holds positions at the University of Ljubljana and the University of London.
  • Žižek said he sees parallels between a recent presidential campaign slogan “corruption for everybody” and the GME saga.
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Slavoj Žižek joined Bloomberg’s “Odd Lots” podcast with Joe Weisenthal recently to discuss the r/wallstreetbets GameStop saga and his essay for the Spectator titled “Corruption for Everybody.”

Žižek, a researcher at the Department of Philosophy of the University of Ljubljana and the international director of the Birkbeck Institute at the University of London, is known for his cultural critiques and communist beliefs.

The Slovenian-born political philosopher has long been a staunch critic of capitalism, and in his latest interview, he once again hits at a central issue of the system: corruption.

Žižek normally doesn’t involve himself in stocks or the market, but the philosopher said the populist logic in the GameStop movement drew him in.

Žižek sees parallels between the GameStop short squeeze phenomenon and a Presidential campaign by the Croatian movie director Dario Jurican in 2019, wherein Jurican used the slogan “corruption for everybody.”

The philosopher says that the campaign promised normal people would get to profit from cronyism, and although voters knew it was a joke, there was significant support for the campaign.

Reddit’s r/wallstreetbets is a similar phenomenon, according to Žižek.

“We are in a situation in which Wall Street, the model of corrupt speculation and inside-trading, always by definition resisting state intervention and regulation, now opposes unfair competition and calls for state intervention,” Žižek wrote in “Corruption for Everybody.”

“In short, wallstreetbets is doing openly what Wall Street has been doing in secret for decades,” Žižek added.

In Žižek’s mind, the GameStop phenomenon was revolutionary because it focused on creating chaos in the markets and giving the power of “corrupt speculation” to the retail trader.

Reddit traders’ investments in GameStop weren’t based on anything fundamental, in Žižek’s view. Instead, the traders’ goal was to band together and bring about a “truly populist capitalism” with the power of “corruption” going to the people.

“The basic idea is, ‘we don’t care what really goes on at GameStop, or if they have a certain new product or whatever. We just want to show the market that success is not the reality of production but the enigmatic character of our act,'” Žižek said.

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GameStop pares early gains after saying it plans to elect Reddit favorite Ryan Cohen as chairman

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GameStop shares rose on Thursday after the company announced it intends to elect activist investor Ryan Cohen as chairman, but quickly pared their gains.

The video-game retailer also nominated five other people for the board – including private equity executive Larry Cheng and Kraft Heinz senior vice president Yang Xu – as it tries to reinvent itself as an e-commerce force.

GameStop’s board also appointed one of those nominees, Jim Grube, to serve on the strategic planning committee. Grube was chief financial officer at Chewy, the online pet supply retailer founded by Cohen.

Voting on the board nominees will take place at the company’s annual meeting of stockholders on June 9, the company said in a statement before markets opened.

Cohen has become an increasingly powerful figure at GameStop in recent months. The billionaire’s RC Ventures first invested in GameStop in September 2020, and is one of the biggest shareholders.

GameStop stock opened around 4% higher but quickly fell back. It stood 0.44% lower at $177.38 at 10.10 a.m. ET.

Cohen was first appointed to the board in January, which analysts have cited as one of the catalysts for the dramatic rise in the stock which captured the markets’ attention at the start of the year.

He has since seized control of the company’s strategy, hiring numerous executives with backgrounds in online retailing in an effort to turn the flagging company around.

On Monday, GameStop said it plans to sell as many as 3.5 million shares to raise up to $1 billion to help fund Cohen’s transformation plans.

Separately on Monday, GameStop said preliminary global sales during the first nine weeks of fiscal 2021 increased by about 11% from the period a year earlier.

Read more: Goldman Sachs handpicks 40 stocks that will enjoy bigger earnings growth than Wall Street expects in 2021

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GameStop’s stock price likely to see limited impact from $1,400 stimulus checks, says Bank of America

GameStop
  • The $1,400 stimulus checks being sent to Americans may have a limited impact on GameStop shares, says Bank of America.
  • BofA has been analyzing non-fundamental factors on the shares including trading volume and short interest
  • GameStop is set to release fourth-quarter earnings on March 23.
  • See more stories on Insider’s business page.

GameStop shares are likely to get just a limited bump up in volume activity and price from the $1,400 stimulus checks that most Americans are receiving to help them financially cope with the coronavirus crisis, according to Bank of America.

This year’s rush by retail investors into the videogame seller’s shares has resulted in the stock price climbing at high as $348 from nearly $19 at the end of 2020. Much of the fervor around the often-volatile stock has come from retail investors on the Reddit social-media platform, who ramped up a battle against institutional short-sellers in late January.

Over the past two months, Bank of America has analyzed the impact on GameStop shares from non-fundamental factors including the number of conversations on Reddit relating to the stock, trading volumes, and short interest. The factors “have shown a tight relationship and large increases have corresponded to several big surges in GME’s share price,” the firm said.

Then the bank began taking into consideration the $1,400 checks the government starting sending out this month. It analyzed the number of conservations mentioning stimulus, as well as “stimmies” and stimmy”, on online forums then plotted the data against GameStop’s share performance.

In late December and ahead of the round of $600 stimulus payments sent under the Trump administration, “there was indeed a spike in stimulus mentions and this was followed by an even larger increase over the past two weeks,” from March 2 through March 17.

“These spikes also coincided with significant increases in GME’s share price,” wrote the bank in a note led by Curtis Nagle, director of equity research at Bank of America.

But “the impact going forward may be limited given two factors,” the bank said. First, conservations involving stimulus “appear to have peaked” and GameStop shares have declined over the past few days. Secondly, the number of recent conversations including both GameStop and stimulus “is low. GME trading volumes are also steadily declining and short interest is down materially.”

The next event on the radar for GameStop investors is the release of the company’s fourth-quarter earnings after the bell on March 23. “We expect an underwhelming quarter given previously announced holiday sales results that were very disappointing,” said BofA.

It noted that GameStop shares over the past five months “have reacted very positively to a string of announcements” including a digital revenue-sharing arrangement with Microsoft and the appointment of Ryan Cohen to be in charge of a new committee aimed at driving a turnaround plan. Cohen is the cofounder of pet products retailer Chewy and GameStop’s largest individual shareholder.

Bank of America maintained its underperform rating on GameStop shares “on significant earnings risk ahead.”

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GameStop has fallen nearly 50% from March intraday highs, but ‘diamond hands’ Reddit traders are still holding

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Day traders piled into GameStop stock in January, alerting Wall Street to the power of amateur investors

GameStop stock has fallen nearly 50% from March 10 intraday highs of $348.40, but that hasn’t stopped Reddit traders from holding the stock.

Traders on the popular r/wallstreetbets forum are doubling down their bets on the beleaguered video game retailer despite falling short interest and share prices.

GameStop stock was down as much as 20% on Tuesday before it mounted a recovery. Short interest in the stock has dropped to just 15.77% of its float as of March 16, according to data from Ihor Dusaniwsky of S3 Partners.

Even in face of the bearish news, Reddit traders continued to comment about their “diamond hands” on the GameStop thread of r/wallstreetbets for Tuesday, March 16, referring to investors who hold a stock or cryptocurrency regardless of potential risks, headwinds, or losses. The term is used to represent a group of retail traders’ collective strength in the markets if they act in unison.

A Reddit user going by the name u/darkspherei commented on the March 16 GameStop thread, “upvote if you ain’t selling 💎🙌🦍🚀,” and quickly received nearly 3,000 upvotes.

The online community is attempting to band together once again to “defend” GameStop.

Another commenter on the site going by u/_exordium argued the forum can create a repeat of February’s rise in prices if they band together.

“Don’t forget, in January once it tanked, we all quieted down for a while, but we never f—-‘ left and we never f—-‘ sold. When this place is overrun by FUD and shills, we wait…Hang the f— in there,” u_exordium said.

Despite the rallying cries, and the recent appointment of Chewy co-founder Ryan Cohen to lead a digital shift at the company, shares of GameStop traded down 10.79% as of 11:44 a.m. ET on Tuesday.

GME Chart 1
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GameStop slump and weak February sales data are pressuring a major retail ETF

GameStop
At a GameStop store in North Las Vegas.

  • GameStop on Tuesday was on course for a second straight loss, down as much as 20% during the session.
  • The video game retailer is the largest holding in the SPDR S&P Retail ETF.
  • The ETF was down after February retail sales fell by more than expected, with poor weather a big factor.
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GameStop shares fell by more than 20% during Tuesday’s session. The move lower came alongside a slump in monthly US retail sales and putting pressure on a widely watched retail exchange-traded fund.

GameStop shares were on track for a second straight loss, though shares staged a recovery in the afternoon following a steep decline in early trading. The stock fell by as much as 22% to an intraday low of $172.35.

The video game seller was down alongside other retail stocks after the Commerce Department said early Tuesday retail sales fell by 3% in February. That result was worse than the 0.5% decline expected in a Bloomberg survey of economists.

GameStop is the top holding in the SPDR S&P Retail ETF with a weighting of about 12.4% as of Monday. The ETF, which had about $855 million in assets under management, on Tuesday fell as much as 3.6% to 90.08 before trimming the loss of 2.3%. Among the ETF’s other holdings, Signet Jewelers fell 1.2%, Kohl’s sagged by 2.5% and Rent-A-Center fell 4.1%. Best Buy, meanwhile, edged up 0.2%.

Sales in the electronics and appliances category in February fell by 1.9% month-over-month and on a seasonally adjusted basis. But analysts largely pointed to poor weather as a key reason that February retail sales declined. The loss also came after an upwardly revised increase in January sales.

The US government last week starting sending stimulus checks of $1,400 to most Americans as part of its coronavirus-relief package. That money “will lift disposable income by roughly 25% month-over-month in March, creating a massive tailwind for consumer demand,” Aneta Markowska, chief economist at Jefferies, in a note Tuesday.

Other analysts have said GameStop should benefit from customers having extra funds for discretionary items.

GameStop, the darling of retail investors active on Reddit’s Wall Street Bets community, earlier this month said Ryan Cohen will be in charge of a new committee aimed at driving a turnaround plan.

Cohen is the cofounder of pet products retailer Chewy and GameStop’s largest individual shareholder.

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Retail investors could buy a record $3 billion of US stocks the day they get their stimulus money, one research firm says

Traders work on the floor of the New York Stock exchange
  • Retail investors could snap up a record $3 billion in stocks the day they start receiving their COVID-19 relief funds, says Vanda Research.
  • That could happen as soon as Wednesday or Thursday, when most Americans will start seeing $1,400 deposited into their bank accounts,.
  • Owning small-cap stocks could be a good way to position for this week’s event, says Vanda Research.
  • See more stories on Insider’s business page.

Retail investors could buy a record $3 billion of US equities in a single day when they receive their $1,400 stimulus checks from the US government, according to Viraj Patel, global macro strategist at Vanda Research

The firm says this could happen as soon as Wednesday or Thursday of this week. JPMorgan Chase and Wells Fargo have previously said their customers are slated to start getting the $1,400 checks on Wednesday.

Numerous Americans have already said on social media sites they’ve already received the cash approved by Congress and signed off on last week by President Joe Biden. The aim is to help reinvigorate the world’s largest economy after it was thrown into recession last year because of the coronavirus crisis.

A new round of cash coming into equities would take place at a time that the S&P 500 Index and the Dow Jones industrial average have hit all-time highs, spurred in part by investors rotating into cyclical stocks that should benefit from the recovery in the US economy. Many businesses have been reopening their doors as millions of Americans have received vaccinations to ward off COVID-19 infections.

“But besides just guessing past retail favourites (GME, TSLA, AMC, BB, NIO etc.) in the hope that retail traders will plow their stimulus checks into those stocks once again — we’d think owning small-cap indices (namely the Russell 2000) could be a good way to position for this week’s event,” Patel told Insider via email on Monday.

Vanda Research’s data analysis arm VandaTracks tracks retail investing activity in 9,000 individual stocks and ETFs in the US.

GameStop, AMC Entertainment and BlackBerry have become popular among retail investors who are active on Reddit’s WallStreetBets platform and who drove the January rally in those and other so-called meme stocks.

The small-cap Russell 2000 Index has gained about 19% during 2021, with movie theater operator AMC among its best performers. The company this week will begin showing films again in California, starting in the major market of Los Angeles.

Big buying of US equities on Wednesday would be on the same day the Federal Reserve will release its monetary policy statement. The Fed isn’t expected to make any changes on interest rates but investors will listen for indications from Fed Chairman Jerome Powell about when the central bank will begin to raise interest rates in the face of improvement in the economy.

Read more: Morgan Stanley says to buy these 12 stocks before their unique catalysts drive them to deliver market-beating returns

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New data suggests GameStop’s latest surge is being driven by institutions rather than retail traders

GameStop Clerk
  • GameStop is back above $200, but retail investors might not be behind the push upward in recent sessions, according to VandaTrack.
  • There was no sign “whatsoever” of retail investors driving the price action with net dollar purchases of $8.1 million on Tuesday, says one strategist.
  • The arrival of stimulus checks may spur more retail investors to buy GameStop and other popular stocks.
  • Visit the Business section of Insider for more stories.

GameStop is back in the spotlight with big upside moves in recent sessions, but new data suggest the price action might not be being spearheaded by retail investors as it was during the January rally led by Reddit’s WallStreetBets platform.

In the past two sessions ending Tuesday, the stock had jumped by about $112 to nearly $250 each.

Figures from Vanda Research, which tracks retail investing activity in 9,000 individual stocks and ETFs via its VandaTrack platform, paint a different picture of the most recent rally in Reddit’s favorite meme stock.

“Everybody’s been talking about GameStop,” Viraj Patel, global macro strategist at Vanda Research, told Insider on Tuesday. “You would’ve imagined retail [investors] again were behind that but they’re not because they are buying around a tenth of what they were buying every day of net back in late January,” said Patel who was in London looking at figures from Vanda Research data analytics arm, VandaTrack.

In a tweet on Wednesday, Patel said there was no sign “whatsoever” of a retail-driven short squeeze in GameStop shares.

GameStop shares on Tuesday climbed as much as 28.5% to an intraday high of $249.85. Data from VandaTrack show net dollar purchases on Tuesday were $8.1 million. The shares on Monday popped up as much as 53% to an intraday high of $210.87. On that day, net dollar purchases were $6.1 million.

Patel said there were “big spikes” in daily net purchases by retail investors on January 26 and January 27 when the GameStop retail trade was peaking. On January 26, when the stock soared as much as 95% to $150, net purchases by retail investors were $68.18 million. The following session, the stock rocketed up 157% to an intraday high of $380, with net purchases of $87.48 million, according to VandaTrack. 


Looking at the differences in net dollar purchases in January and the latest rally, “it’s almost as if that gap [appears] to me like it’s a different type of trader or investor behind the recent move,” said Patel. “It’s definitely not retail because these volumes just wouldn’t have the same impact on price compared to what we saw back in January.”

He said the fresh upswing in prices was likely driven by institutions.

Though it could be the culmination of a short-squeeze, with big buyers closing short positions, another possibility could be “a few speculative institutional players – long-short fund managers would be the other type that may like GameStop on a short-term basis, part of the reflation, reopening trade in the US,” he said.

“Given the total volume traded (which still remains significant), we know there’s other types of investors buying/selling. Unlike in [January] where the net purchases by retail account for a bigger share of the total volume,” Patel said in a follow-up email.

Patel expects more retail investors to begin buying GameStop and other popular meme stocks once stimulus checks hit people’s bank accounts as part of the $1.9 trillion coronavirus relief package.

GameStop shares were volatile on Wednesday, marked in part by a brief and sudden plunge of the shares before they turned positive again during the session.

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Payment for order flow models “undermine the relationship between the broker and their client,” Duke Law professor tells Congress

Vlad Tenev, co-founder and co-CEO of investing app Robinhood.
Vlad Tenev, co-founder and co-CEO of investing app Robinhood.

  • Duke Law Professor Gina-Gail S. Fletcher appeared in a hearing with the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday.
  • In the hearing the professor said payment for order flow models pit brokers profits against their clients’.
  • Other experts on the panel even called for the payment for order flow model to be banned altogether.
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In a Tuesday hearing held by the United States Senate Committee on Banking, Housing, and Urban Affairs, Senators sat down with five experts to discuss “Who Wins on Wall Street? GameStop, Robinhood, and the State of Retail Investing.”

In the hearing, Duke Law Professor Gina-Gail S. Fletcher was asked by Sen. Sherrod Brown (D-OH) about stock brokerages using the payment for order flow business model.

Payment for order flow (PFOF) entails brokerages selling customers’ buy and sell orders to market-makers like Citadel Securities, Virtu, or Two Sigma. This allows the firms to generate revenue without charging commissions for trades.

When asked about the PFOF model, Duke law professor Gina Fletcher said that payment for order flow models “undermine the relationship between the broker and their client.”

The testimony was a rebuke of brokers like Robinhood, which rely on payment for order flow for the majority of their revenue.

Fletcher said that payment for order flow “pits the broker’s primary revenue source directly against the clients to whom they owe a duty of best execution.”

She also noted that it allows brokers to “say that they are offering zero-commission trading to retail investors when commissions are being subsidized by wholesalers.”

Professor Fletcher continued: “Under the payment for order flow model, brokers are incentivized to put their own profit-seeking interest above their clients’ in deciding where to route orders.”

Other experts on the panel included Rachel J. Robasciotti, the founder & CEO of Adasina Social Capital, who said that payment for order flow allows brokerages to profit while they give clients trading execution prices that are well below market value.

Robasciotti argued that the practice should be banned altogether due to the lack of disclosure adding, “if you don’t see what you are paying you are probably paying more than you would be comfortable with.”

Other experts weren’t as quick to call for a ban on the practice, but the group all agreed that the Securities and Exchange Commission should look into the payment for order flow model to decide if it should be allowed to continue.

To find out if a broker is getting paid for order flow, check out this article to learn more.

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