GameStop (GME) shares gained another 92% today to close at a record $147.98 a piece in another clash filled session between reddit WallStreetBets and short sellers. The company’s market cap is now over $10 billion.
Shares were up more than 50% in after-hours following a tweet from Tesla (TSLA) CEO Elon Musk, who took notice of the stock’s rise.
Gamestonk!! https://t.co/RZtkDzAewJ
— Elon Musk (@elonmusk) January 26, 2021
The stock was temporarily halted for trading during Tuesday’s trading session, as was the case on Monday and last Friday.
Earlier on Tuesday, billionaire Chamath Palihapitiya tweeted he bought $115 call options in GameStop which expire in February, betting that the stock will go higher.
Lots of $GME talk soooooo....
We bought Feb $115 calls on $GME this morning.
Let’s gooooooo!!!!!!!! https://t.co/XhOKL1fgKN pic.twitter.com/rbcB3Igl15— Chamath Palihapitiya (@chamath) January 26, 2021
The crush on short sellers has been escalated since last week when shares spiked more than 100%. Wall Street veterans say they’ve never seen anything quite like this. The clash between short-sellers and Reddit WallStreetBets (WSB) caused a massive short squeeze on the stock. A short squeeze forces those who bet against the shares to buy in order to forestall bigger losses, sending the stock price much higher.
The story behind last week’s massive spike involves a response to short seller Citron Research’s recent prediction that shares of the video game retailer will drop to $20 a piece. Last Tuesday Citron’s managing partner Andrew Left announced he would list five reasons why the shares will plunge.
Reddit users dubbed WallStreetBets (WSB), a forum on the message board platform, pushed back on Left’s call and apparently helped create a massive short squeeze on the stock.
“I’ve never seen such an exchange of ideas of people so angry about someone joining the other side of a trade,” said Left in a YouTube clip last Thursday. He went on to list the reasons why he thinks the stock will go down to $20/share.
The reaction from Reddit users and other retail investors sent the stock up more than 50% last Friday as they celebrated the stock’s squeeze to record highs.
Also on Friday, Left said he would stop commenting on the stock.
“We are investors who put safety and family first, and when we believe this has been compromised, it is our duty to walk away from a stock,” Left wrote in a letter posted on Twitter.
The stock had been trending higher prior to last week. On January 12, shares were trading around $20/each after GameStop announced Ryan Cohen was joining the board of directors. Cohen is an activist investor and co-founder of pet retailer Chewy Inc (CHWY).
In July of 2020, the stock was trading at around $4 a share.
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre
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