Shares Surge 65% in May, Trimming Short Sellers’ Profits Amidst Volatile Trading
GameStop’s (GME) remarkable rally has dealt a severe blow to skeptics, with short-sellers staring at a staggering $1.4 billion in mark-to-market losses as the company’s shares nearly tripled this month. The meme-stock frenzy, reignited in May, witnessed shares soaring as much as 119% in a volatile trading session on Monday, prompting multiple halts.
The Grapevine, Texas-based retailer saw its stock rise by 185% this month, marking a sharp turn in fortunes for those betting against it. Despite trimming gains to 65% by late morning, GameStop’s resilience has confounded critics.
The resurgence of meme stocks, epitomized by GameStop, echoes the frenetic trading activity of 2021, where short-selling hedge funds suffered substantial losses. Gabe Plotkin’s Melvin Capital Management notably shuttered amidst the chaos.
While short sellers enjoyed early success in 2022, reaping around $400 million in profits from January to April, the recent rally has erased those gains, underscoring the volatile nature of meme-stock trading.
Although short interest remains high at around 24%, borrowing costs have surged, reaching over 10% annually, reflecting increased skepticism among investors. Despite lingering doubts, GameStop’s resilience suggests that the meme-stock phenomenon is far from over, posing challenges and opportunities for investors alike.
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