Nearly one month after GameStop’s leap to record highs, Reddit traders are boosting the meme stock all over again. And just like in the January rally, short-sellers are hurting big.
Investors selling GameStop short – betting the stock price would decline – posted $664 million in mark-to-market losses as shares of the gaming retailer rocketed 104% into the close, according to financial analytics firm S3 Partners. The stock’s 84% intraday gain fueled another $1.19 billion in losses, bringing the two-day total to more than $1.85 billion.
To be sure, the losses pale in comparison to those fueled by the January surge. GameStop shorts are down $10.75 billion year-to-date on their bearish bets, according to S3. The sum includes Thursday’s intraday rally.
GameStop first spiked higher last month as day traders uniting in online forums like the Wall Street Bets subreddit scooped up shares in hopes of driving a massive short squeeze. Such a technique involves driving shares high enough to force short-sellers to cover their own positions by buying the stock. Short-seller purchases further lift prices and form an upward spiral for the stock.
The Reddit-trader phenomenon faded through February as widespread selling pulled shares from their extremely elevated levels. Yet a last-minute rally on Wednesday reignited the buying frenzy and prompted new calls on Wall Street Bets to drive a new short squeeze.