Currently, it would take short sellers a bit more than four days to fully cover their positions as per data from MarketBeat based on the average trading volumes of the stock. This uptick in short interest does not necessarily indicate that a GameStop short squeeze will occur but it does increase the odds of that happening. Since 15 July, the price of GME stock has risen almost 3%. Notably, this increase in short positions occurred only days before the company’s 4-for-1 stock split occurred. These traders are constantly monitoring the price action to act if there are indications that another GameStop short squeeze is taking place. However, the influence of retail traders on the price progressively faded, although the stock never got close to where it was before the squeeze.Īs a result of these events, GME is now considered a “meme stock” – a designation that indicates that the stock price could be highly influenced by the activities of retail traders. The price action continued to be highly volatile and multiple sharp upticks and downticks occurred during the first half of 2021. This fuelled a rally that pushed GME’s price to $120 a share (post-split). However, in January 2021, coordinated efforts from retail traders managed to push the price of GME stock to all-time highs as they squeezed short-sellers out of their positions by buying large amounts of stock and short-dated option contracts.īrokerage firms were forced to hedge their exposure to these contracts by buying GME stock in bulk. Short-sellers were expecting to see the company’s share price decline as the business deteriorated. The company managed to stay afloat by liquidating a large chunk of its inventory to stay cash flow positive. Sales kept declining in the 2021 fiscal year due to the pandemic. In addition, the pandemic affected the company’s operations as stores remained closed for months due to lockdowns.This put GameStop in a difficult position as its negative cash flows increased significantly.īy the end of February 2020, the company had cash and equivalents of roughly $500m but burned nearly $414.5m during that fiscal year (2019). GameStop has been on the radar of short sellers for a while as the company’s fundamentals have been deteriorating for years since most consumers turned to online channels to purchase video games.
GameStop short squeeze explained: Why is this a possibility? The firm employs over 30,000 people and is headquartered in Grapevine, Texas. GameStop’s CEO is Matt Furlong, who was appointed as head of the company in June 2021. In addition, the company sells products via its official website.īy the end of January 2022, GameStop had 4,573 stores, most of which (3,018) are spread across the US territory.Īside from video games, the company also sells toys, collectibles, apparel, and gadgets while it has recently pivoted to the Web3 space through the launch of a marketplace for NFTs called the GameStop NFT Marketplace. Founded in 1984, GameStop is a retailer of entertainment and gaming products with stores located in the United States, Canada, Australia and Europe.
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