GME; Gamestop has been the talk of the town since January 25 2020. There has been a frenzy of activities around the stock.
The stock was trading at $20.20 on April 1 2020. On January 14 2021 it took a different turn with an uptick in price. It became cynical on Jan 27 with nearly 400% price appreciation.
The news in Jan 2021 has it all written on the wall. Institutional investors believed Gamestop as a Corporation may be doomed. Motivated by taking profits, these investors shorted OR borrowed and sold Gamestop shares in the open markets. However, not everyone in financial markets was aligned with this idea. This started a buying ritual that snowballed into Gamestop stock and skyrockted it many hundred times over!
Penning this article today, Feb 1st 2021, the madness around this stock is still not over. Where is it headed? The most rational explanation can be found in the term Short Interest Ratio. Short Interest Ratio is the number of Company's Shares that have been sold short divided by average daily volume of shares traded. Anyone institution or investor, who bet against Gamestop and borrowed to sell shares in open market a.k.a. short selling, would be required to cover his position prior to the next settlement. With the price of Gamestop skyrocketing, these naysayers were forced to buy shares at sky-high prices to pay for the loan and take steep losses.
The gravity of the situation takes a turn to the worse when one realizes that the number of shares of Gamestop that were short soled is more than the total number of Gamestop shares that exist in the market. Whoaaa!!
It will be tough for pandits and SEC to not classify this as manipulation; but that will have to be seen.
The next question arises is, Who are the naysayers or short sellers? The most prominent name that has been coming up is that of 'Melvin Capital'. Melvin capital started the year with $12.5 Billion, ending the month with about $8 Billion after accounting for the losses.
Other Institutional investors involved in the frenzy included 'D1 Capital Partners', 'Maplelane Capital', 'Candlestick Capital Management' and 'Citron Capital'.
Information about 'Short Interest Ratios', outlining short positions in stocks is published by the stock exchange in which the company is listed. For Gamestop, the latest short interest positions can be purchased from NYSE at NYSE Short Interest Positions.
The not so current information for Gamestop' Short Interest Ratio is also available at MarketWatch.
