GameStop Corp. (GME) - Get Report shares rocketed to a fresh all-time high Wednesday as the battle between retail investors and Wall Street veterans continues to play out in one of the market's most unlikely stocks.
The stock pared a massive chunk of its pre-market gains, however, when CNBC reported that Melvin Capital, a hedge fund run by Gabriel Plotkin, exited its GameStop short late Tuesday, although several questions over the strength of its liquidity and capital remain.
Prior the Reddit-driven frenzy that has lifted shares in the group more than 700% and added more than $8 billion in market value, GameStop was a struggling video game retailer looking to find a pivot that would give it a slice of the download market while finding a way to entice customers during a coronavirus-trigged slump in same-store traffic.
The addition of Chewy Inc. (CHWY) - Get Report founder Ryan Cohen of RC Ventures LLC, however, triggered an unpredictable surge for the money-losing group, fueled in part by retail investors in a Reddit-based chatroom known as 'Wallstreetbets', where traders share tips, opinions and hype for the stocks they invest in. An active thread on GameStop current has around 38,000 comments.
GameStop shares have risen 1700% since then, including an early Wednesday surge of 160% that has the stock changing hands at $380.00 each that values GameStop at more than $26 billion.
Spectacular moves such as these are attracting attention from high-profile investors such as Elon Musk, Cameron Winklevoss and Michael Bury, while also encouraging deeper short-selling positions from hedge funds who feel certain the current gains are unstainable for a retailer that isn't expected to turn a profit for at least the next two years.
S3 Partners, which tracks details on short positions, said there was more than $5.5 billion in bets against the stock at the close of trading Tuesday, representing 71.8 million shares, but also noted that short-sellers are nursing losses of more than $5 billion since the start of the year.
Citron Research, a high-profit short-seller that published a report highlighting GameStop's weaknesses last week, has claimed to be the victim of harassment and threats from Reddit users before pulling its position against the stock.
"GameStop shorts and longs are in a knockout battle being waged in the stock market as well asocial media platforms,"S3 Partners said. "Both sides are holding their ground with strong conviction, but in the end, one side will be the outright winner, and in the later rounds of this prize fight the long shareholders are way ahead on points."