GameStop stock surges, no one truly knows why

2021-02-28 12:08:45

GameStop logo is seen near displayed stock graph in this illustration taken Febr 2, 2021. [Photo/Agencies] NEW YORK-Wall Street's GameStop saga just would not quit. After rocking the stock market at the end of January in a speculative buying frenzy, shares in the video game store chain are buzzing anew on Wall Street. GameStop shares more than doubled in price on Wednesday, then rocketed further on Thursday in trading so heated that stock market operators tapped the brakes to cool the situation. After weeks of dormancy, shares of GameStop jumped 18.6 percent to close at $108.73 on Thursday, having surged 75 percent in the last hour of trading on Wednesday. Thursday's climb, which topped 101 percent before paring its gains, came even as most stocks across Wall Street fell sharply on worries about rising interest rates. The moves are reminiscent of the shocking 1,625 percent surge for GameStop in January, when bands of small investors on social media ignited the rally in the struggling video game retailer's stock. No clear reason seems to be behind this recent move, leaving market observers grasping at what little news is out there. But it does demonstrate the increased power that regular investors suddenly have. One major factor that drove last month's surge is not as big a player this time around-a huge buildup of what's called "short interest" positions, or bets by investors that the stock is set to fall. After short-selling funds got badly burned by last month's rally, fewer GameStop shares are being sold short now. That means this pop may not reach last month's heights or be sustainable. "It's like dropping a ping-pong ball on the table," said Sam Stovall, chief investment strategist at CFRA."The first bounce is the greatest while subsequent bounces are a bit more muted. We're still getting a bounce, but it's probably not going to drive up GameStop to $500 a share." Emotion or risk-taking Trading driven by emotion or risk-taking rather than business fundamentals put the spotlight on GameStop's wild ride, which captured attention over what some see as a battle between ordinary punters and funds who dominate trading on Wall Street. The spike in shares of GameStop, trading in the Nasdaq under the symbol GME, began a day after it was announced that its chief financial officer Jim Bell will step down on March 26. News website Business Insider cited anonymous sources familiar with the matter as saying Bell was ousted by new GameStop board member Ryan Cohen, an activist investor known for shaking companies up to get them on the path to success. Cohen, a co-founder of online pet products shop Chewy, took a stake in GameStop and this was supposedly among the triggers that caused shares to lift off this year. Amateur investors on online forums flexed their buying muscle on shares of unloved companies such as AMC cinema and headphone maker Koss as well. After peaking at about $380 per share in late January, GameStop shares fell back to about $40 at the end of last week. Given the wild swings in its stock price, it is anybody's guess what the next move in GameStop will be. Members of the WallStreetBets forum on Reddit though continued to tout GameStop shares as heading for the moon. "I feel like the people who are still holding GME from last month are stuck at the top of Everest and we just built a rescue helicopter out of tinfoil and used car parts," wrote a Reddit user from the account of Healthy_Mammooth_1066. "Hang in there diamond hands. Help is on the way." Agencies Via Xinhua