GameStop surge leaves short sellers with a $1.4B burn

GameStop surge leaves short sellers with a $1.4B burn
Skeptics betting against the popular meme stock were hit with massive paper losses as the company’s share price roughly tripled this month.
MAY 13, 2024
By  Bloomberg

Skeptics betting against video-game retailer GameStop Corp. are facing a more than $1 billion loss after the company’s share price roughly tripled this month.

Shares of the meme-stock soared as much as 119% in a raucous open Monday amid a flurry of trading activity that triggered at least eight halts for volatility in the opening hour. With the stock up some 185% in May, mark-to-market losses for short-sellers has ballooned to $1.4 billion, according to S3 Partners data.

Shares of the Grapevine, Texas-based company trimmed Monday’s gains to 65% at 11:20 a.m. in New York.

The meme-stock phenomenon became a public frenzy in 2021 as cash-rich investors pumped up the stock market and bet against short-selling hedge funds. The mania delivered huge losses to the likes of Gabe Plotkin’s Melvin Capital Management, which shuttered, and rich returns to those placing bets early in the frenzy before stocks like GameStop came crashing down.

Short sellers that bet against GameStop had been winning through the first four months of the year, a signal that meme-stock volatility can quickly erase paper gains. Skeptics were up an estimated $400 million from January to April, S3 data show, before falling back into the red on the whole through Monday morning.

The amount of GameStop shares sold short as a percentage of those available for trading has stayed at roughly 24%, according to financial analytics firm S3 Partners. That’s elevated for a typical company but nowhere near the levels of 140% that preceded the 2021 mania.

The cost to bet against the company has been trading higher over the past week as shares picked up gains, with recent borrowing costs at a greater than 10% annual financing fee range, S3 data show.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.