GameStop (GME) shares closed 51% higher at $65.01 each on Friday after an apparent crush on short-sellers. The stock was temporarily halted for trading due to volatility mid-session after spiking a whopping 70%.
The story behind the massive spike has to do with short seller Citron Research’s recent prediction that shares of the video game retailer will drop to $20 a piece. Over the last week, the stock has done just the opposite. Here’s why:
On Tuesday, Citron’s managing partner Andrew Left announced he would list five reasons why the shares will plunge. Reddit users called WallStreetBets (WSB), a sub-Reddit community on the platform, pushed back on Left’s call and apparently helped create a massive short squeeze on the stock. A short squeeze forces short sellers to buy in order to forestall bigger losses, sending the stock price much higher.
“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 on Thursday. He went on to list the reasons why he thinks the stock will go down to $20/share.
The reaction from retail investors, Reddit users and the like have sent the stock up more than 100% over the last week.
On reddit, WSB users on Friday were celebrating the stock’s squeeze to record highs.
Adding fuel to the fire this week, TV personality and co-founder of The Street, Jim Cramer, has been tweeting about the crush on shorts.
$GME, squeeze of a lifetime. Not since Resorts International have i seen one like this.. Now you see why i spent so much time tweeting about it?
— Jim Cramer (@jimcramer) January 22, 2021
The fight over GameStop appears to have come to a head on Friday, when 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 past 10 days marks the most volatile period for GameStop during its history, according to Bloomberg data.
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre