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.

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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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Tesla short-sellers lost $38 billion throughout the automaker’s colossal 2020 rally

Elon Musk
Elon Musk.

  • Tesla short-sellers saw $38 billion in mark-to-market losses throughout 2020, Bloomberg reported Thursday, citing S3 Partners data.
  • Short interest in the company’s shares plunged to less than 6% of Tesla’s float from nearly 20% at the start of last year.
  • The losses trounce the $2.9 billion total seen in 2019 and come on the back of Tesla’s 740% surge over the past 12 months.
  • Watch Tesla trade live here.
  • Visit Business Insider’s homepage for more stories.

Investors betting against Tesla lost billions last year, as the automaker’s shares leaped above nearly all estimates.

Short sellers saw $38 billion in mark-to-market losses throughout 2020, Bloomberg reported Thursday, citing data from S3 Partners. Short interest in the shares fell to less than 6% of Tesla’s float from nearly 20% as the company’s rally led investors to close out their bearish positions.

Tesla bears lost more than any other group of short-sellers in 2020. Those betting against Apple saw the second-largest deficit of nearly $7 billion, according to Bloomberg.

Read more: Wall Street’s biggest firms are warning that these 7 things could crash the stock market’s party in 2021

The hefty losses are up sharply from the previous year’s total. Bearish investors lost $2.9 billion in 2019 as Tesla jumped nearly 70% from its June low into the end of December.

Short-selling a stock involves selling borrowed shares and buying them at a lower price. Investors shorting a stock profit from a drop in price.

Tesla shares gained 743% in 2020, boosted by steady profitability, newly bullish analyst outlooks, and outsized demand from retail investors. The rally pushed CEO Elon Musk’s net worth to $158 billion in December and established him as the world’s second-wealthiest person – after Amazon CEO Jeff Bezos.

The automaker split its shares on a five-for-one basis in August after Tesla’s stock price climbed above $2,000. While the action had no effect on the company’s fundamentals, some analysts saw the move as helpful to stoking new interest from retail investors.

The stock most recently charged higher upon inclusion in the S&P 500 index. News of Tesla on the S&P lifted shares in mid-November. Soon afterward, Goldman Sachs analysts noted that institutional investors tracking the index could fuel Tesla’s next leg higher as they look to match the benchmark’s weight.

Musk has repeatedly squared off with short sellers on social media. The chief executive’s latest mockery of the group came in July when he sold red shorts featuring the company’s logo. The “short shorts” – marketed as a sardonic rebuke to the company’s short-sellers – proved so popular on their launch day that Tesla’s merchandise website crashed.

Tesla closed at $705.67 per share on Thursday. The company has 20 “buy” ratings, 44 “hold” ratings, and 19 “sell” ratings from analysts.

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TSLA

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