A bizarre rally for heavily shorted stocks continued today, as online brokerages struggled with an enormous volume of traffic and day traders pushed prices unexpectedly higher.
Since the GameStop Corp. stock options frenzy that quietly began early this month and exploded over the past week, some traders have followed by investing in other shorted stocks, with prices surging far past the returns seen in the indexes that include them.
As of closing on Jan. 21, GameStop’s stock price was $43.03, up from 128% from $18.84 at the Dec. 31 closing. But that changed dramatically this week, with the price up nearly 700% midday today to $332.89 compared with the Jan. 21 close.
The phenomenon has been attributed to a group of traders on a Reddit stock-tips board whose strategy to stick it to short-sellers was endorsed by Tesla Inc. CEO Elon Musk, among others.
And it appears to have spread well beyond GameStop, as is evident from price changes in some of the most-shorted small-cap stocks in the Russell 2000. Clothing manufacturer Express Inc., for example, saw its stock price rocket 800% to $10.41 at midday from $1.16 on Jan. 21.
Between the Jan. 21 close and midday, the S&P 500 dropped by 1.5%, while the Russell 2000 was down 0.3%.
GameStop is the most-shorted stock in that small-cap index, according to a report from Barron’s. Other public companies on that list, calculations by InvestmentNews show, have also seen prices rise considerably over the past week. Shares of Accelerate Diagnostics Inc., for example, were up 78%, as were those of Bed Bath & Beyond Inc. (77%), National Beverage Corp. (67%), Macerich Co. (65%), Tanger Factory Outlet Centers Inc. (54%), Dillard’s Inc. (52%), AMC Networks Inc. (41%) and Ligand Pharmaceuticals Inc. (27%).
Other shorted stocks that have seen massive price changes over the past week include AMC Entertainment Inc. (up 444%), BlackBerry Ltd. (76%), and Tootsie Roll Industries Inc. (48%).
The Long Island-based firm, previously penalized by FINRA, is a longtime purveyor of alternative investments.
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