GameStop (GME) shares have been the talk of the town recently, with a sudden and unprecedented surge in price that has left many investors scratching their heads. The stock, which had been trading at relatively low levels for some time, suddenly shot up in value, causing chaos in the market and prompting regulators to step in.
The surge in GameStop's share price has been attributed to a phenomenon known as a short squeeze, where investors who had bet against the stock are forced to buy it back at higher prices to cover their losses. This sudden buying frenzy has caused extreme volatility in the market, leading to concerns about potential manipulation and market stability.
Monday but the catalyst for the surge happened online.
‘Roaring Kitty’, previously identified as Keith Gill, posted on X/Twitter for the first time since 2021, creating a flurry of activity on Monday.
Meme stock mania appears to be far from dead. During the last incredible short squeeze cycle, which saw GameStop (NYSE:GME) surge to incredible levels, many retail investors made a killing. Today, GameStop appears to once again be in focus, with GME stock surging more than 75% in early afternoon trading on some interesting news.
In late 2020, Gill became renowned for his stock market advice on YouTube and the subreddit Wall Street Bets. In particular, he advised his fellow investors to buy GameStop shares, believing that they were undervalued. Some major Wall Street institutions, conversely, were betting on GameStop to fail, as a declining number of people went to physical stores to buy video games, instead purchasing them online.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in expectations that the market value will fall below that level when it’s time to pay for the borrowed shares.
GameStop was not the only meme stock that was on the rise Monday. AMC jumped 15%, while Reddit traded 9% higher.
“Short sellers may be in for a bumpy and bloody ride in these stocks,” Dusaniwsky said.
Coming into 2021, GME shares had lost a third of their value over the previous five years. Investors betting the stock would fall, the shorts, controlled GME stock shares in late 2019. That overly bearish bet set up a perfect environment for a massive short-squeeze rally.
The entire short squeeze saga was detailed in the movie "Dumb Money."
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