Please ensure Javascript is enabled for purposes of website accessibility

Short Squeeze Sends GameStop Stock Surging. Again.

By Danny Vena - Jan 21, 2021 at 8:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The video game retailer jumped on an otherwise tepid market day.

Video game retailer GameStop (GME -9.35%) has been on fire lately. The shares gained roughly 100% over a two-day period last week, following news that Chewy (CHWY -11.68%) founder and activist investor Ryan Cohen and two of his associates would join GameStop's board of directors. The short squeeze continued today, pushing GameStop shares up another 10%.

Noted activist short-seller Andrew Left of Citron Research contributed to the run-up today. Citron had posted on Twitter that it would present a livestream detailing five "reasons GameStop buyers at these levels are the suckers at this poker game." The event was originally booked for 11:30 a.m. EST on Wednesday,  but was rescheduled so it didn't have to compete with President Joe Biden's inauguration. Then, the livestream event was unceremoniously canceled.

Upward arrow composed of fire and sparks.

Image source: Getty Images.

A subsequent post on Twitter noted, "Too many people hacking Citron twitter, will record and post later today. [GameStop] going to $20 buy at your own risk." Left eventually posted a hastily shot video on Alphabet's YouTube, but the effort was widely criticized for containing factual errors and rehashing many of Citron's old arguments. 

Last week, Wedbush analyst Michael Pachter noted the significant short interest in GameStop at 138% of the shares available for trading, helping set the stock up for its massive short squeeze.

GameStop stock initially rallied on the positive development. As the price of the shares continued to rise, investors who had bet against the stock bought shares to cover their short positions, further boosting the stock. This drove additional short-sellers out, with the rising demand fueling further share price gains.

High trading volume typically accompanies a short squeeze, and today was no different. More than 55 million GameStop shares traded hands today, which is roughly five times the average daily volume recorded in the month of December. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
$91.00 (-9.35%) $-9.38
Chewy, Inc. Stock Quote
Chewy, Inc.
$24.42 (-11.68%) $-3.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.