GameStop rally builds after puzzling ice-cream cone tweet

156

GameStop shares surged more than 50% today as amateur investors jumped back into the stock weeks after an unprecedented short squeeze triggered a 1,600% rally in the video game retailer.

The latest moves build on yesterday’s rally in GameStop and other so-called “stonks” – an intentional misspelling of “stocks” – favoured by retail traders on social media sites such as Reddit’s WallStreetBets.

The new frenzy puzzled analysts, who had ruled out another short squeeze of the stock which had battered some hedge funds.

It also fuelled more hype after some Twitter users pointed out a cryptic tweet of an ice-cream cone photo from activist investor Ryan Cohen.

Cohen is a major shareholder in GameStop and a board member.

A short squeeze takes place when the price of a heavily-shorted stock rises sharply, forcing short-sellers who had bet against the stock to buy it at those prices to avoid further losses.

Shares of cinema operator AMC Entertainment, another stock caught up in last month’s rally, jumped 17% in pre-market trading today following an 18.1% rise yesterday.

Reddit discussion threads were buzzing again about GameStop today, with members exhorting others to pile into the stock as the rally gathers steam.

Earlier today, GameStop’s Frankfurt-listed shares trebled at one point, overshooting its 100% surge on Wall Street overnight, as European retail traders joined in the fresh buying push.

The sharp moves surprised the market, which thought the excitement behind the recent Reddit-fueled rally had died down.

 

GameStop shares skyrocketed in January as retail investors, urged on by popular Reddit forum WallStreetBets, bought the stock as a way to punish hedge funds that had taken an outsized short bet against it.

The risky trading strategies employed by some traders on Reddit have drawn the ire of investing legends such as Charlie Munger, long time business partner of Warren Buffett.

“It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors,” said Munger, Berkshire Hathaway’s vice chairman.

GameStop’s US-listed shares soared nearly 104% yesterday. The volatility in GME, AMC Entertainment and other stocks led to outages on Reddit and periodic trading halts by the New York Stock Exchange.

Online brokerage Robinhood said in a tweet that the NYSE action would impact all brokerages, but that it had not paused trading on the shares.

“It’s a pretty risky play to try and buy now – what we might (see) at the open of the cash market is some people trying to get in,” said Oriano Lizza, premium sales trader at CMC Markets in Singapore, which does not offer pre- or post-market trade.

The latest surge comes after a couple of weeks that saw the shares move in relatively tighter ranges.

Comments are closed.

Subscribe to Newsletter
close-link