Shares in GameStop went on a wild ride on Friday, surging nearly 80 per cent after the struggling US video games retailer found itself at the centre of a battle between short-sellers and amateur online traders.
The company, whose stores have struggled for sales in the pandemic, has been a favourite of day traders on the popular message board r/wallstreetbets on the website Reddit, which has helped double the value of the stock since the start of the year.
A tug of war emerged on Thursday after famed short-seller Citron Research said it had placed a bet against the stock, saying the company was “pretty much in terminal decline”. That view drew out traders who collectively pushed the stock higher, aiming to squeeze Citron and others out of their short positions.
As the assault continued on Friday, Andrew Left, the founder of Citron, said he would stop commenting on the stock, saying this was in response to an “angry mob” conducting repeated hacking and intimidation attempts.
The incident will further intensify the debate over the growing influence of retail investors in US markets. Historically their impact has been muted in an equity market in which more than $500bn of deals are executed every day. But, encouraged by brokers’ moves to commission-free trading, their activity has soared in the past year, leaving a deep impression on some individual stocks.
Several companies have watched their stock prices soar and crash in a matter of days, with the activity openly discussed on sites like Reddit.
Mr Left earlier in the week described buyers of GameStop stocks as “suckers at this poker game”. He followed up his remarks on Thursday with a YouTube video saying there was “no short squeeze happening as we speak” with the stock at $40.
“I’ve never seen such an exchange of ideas of people so angry about someone showing the other side of a trade,” he added.
Users on Reddit reacted angrily to the charge. One user posted a video of Mr Left’s face superimposed over R Kelly, the star currently in jail awaiting trial for sex abuse charges, during an interview in which the singer says he is “fighting for my fucking life”. Another called Mr Left a fraud.
A month ago, one Reddit user said Mr Left should be “public enemy #1” of r/wallstreetbets.
Citron could not immediately be reached for comment.
Friday’s rally sent the shares to a high above $76, giving the company a market capitalisation above $4bn, roughly three times the $1.3bn price tag it enjoyed at the end of 2020. Later in the day, the shares were trading at about $60.
More than $8bn worth of GameStop shares had changed hands by 2pm, a record level, according to Bloomberg. Trading of options contracts tied to the shares also skyrocketed.
GameStop in December reported a 31 per cent year-on-year drop in sales for the first nine months of 2020, adding last week that sales of new gaming consoles had helped staunch the decline over the holiday period.