GameStop shares are jumping again, but short sellers aren’t backing down

Investing

Ramin Talaie | Bloomberg | Getty Images

GameStop is popping again after a wild session, pushing the stock back above $100 briefly, but short sellers betting against the videogame retailer are nowhere near letting up.

Shares of GameStop last jumped more than 20% to around $92 in premarket trading on Tuesday after hitting triple digits earlier in the premarket session. The advance came after a rollercoaster day Monday that saw the stock more than double and turn negative within hours. The stock closed Monday up 18% at $76.79.

GameStop has rallied more than 300% in January alone as an army of retail investors marshalled against short sellers in online chat rooms, encouraging each other to pile on and keep pushing the stock higher. Short sellers have amassed a mark-to-market loss of $4.2 billion year to date in the stock, including a loss of $917 million on Monday and another $1.6 billion on Friday, according to data from S3 Partners.

Despite the massive squeezes, short sellers are doubling down on their bearish bets. Over the last 30 days, GameStop shares that have been borrowed and sold short increased by 1.4 million shares, worth $91 million, an increase of 2% as its stock price more than doubled, according to S3 Partners. 

Short sellers also reloaded bets over the last seven days, where shorted shares jumped by 769,000, worth $50 million, the data showed. GameStop’s short interest stands steadily at 139%, unchanged from a week ago.

“Much like the Revolutionary War, the first line of troops goes down in a rain of musket fire, but is replaced by the troops next in line,” Ihor Dusaniwsky, S3’s managing director of predictive analytics, said in an email. “We are seeing a short-squeeze on older shorts who have incurred massive mark-to-market losses on their positions but are seeing new shorts coming in.”

“This is keeping overall shares shorted in GME relatively flat even though there is a significant short squeeze occurring in a sizable amount of existing short sellers,” Dusaniwsky added.

The explosive rally in GameStop was largely driven by the buying frenzy among individual investors active in online forums, especially the infamous “wallstreetbets” Reddit chat room with more than two million subscribers. One trending post on Tuesday features a screenshot of the user’s portfolio showing an over 1,000% return on GameStop’s stock.

Hedge fund Melvin Capital Management, which has a short position on GameStop, has fallen 30% this year through Friday, according to Wall Street Journal.

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