Video game retailer GameStop, that store you stumble into at the mall while trying to figure out why you’re at a mall, is having quite a moment on Wall Street. The company went on a rollicking market run Friday, skyrocketing nearly 70 per cent before trading was briefly halted due to online drama involving its stock.
The gaming store has been on a roll ever since recent shifts within the company’s board of directors “sparked a rally” of its stock. Since then the GameStop’s value has continued to climb. Bloomberg reports:
GameStop is up 245% in January to date, with its average daily rolling 10-day volatility peaking at the highest level in the nearly two decades the stock has been trading, data compiled by Bloomberg show. Friday’s eye-popping surge fuelled its market value above $US4.5 ($6) billion at its peak.
This surge has been partially fuelled by a controversial band of online proponents, day traders on a reddit thread: r/wallstreetbets. The r/wallstreetbets traders have been vociferously rallying behind GameStop’s stock, ginning up interest via social media, with The Street noting that the redditors are “responsible for pushing the stock to levels it hasn’t seen in years.”
This is where the drama part comes in. Critics claim that the online supporters are having an undue influence on the stock’s trajectory. The Verge, for instance, notes that the “hype generated by r/wallstreetbets helped create what’s known as a “short squeeze” on GameStop’s stock.” A short squeeze, explains Yahoo Finance, is essentially a pumping up of the stock that “forces short sellers to buy in order to forestall bigger losses, sending the stock price much higher.”
One of the more vociferous critics of GameStop has been well-known short-seller, Andrew Left, who runs Citron Research, a newsletter critical of companies Left deems “fraudulent” or doomed to fail. Contrary to the redditors, Left has been predicting the gaming company’s imminent downfall.
On Thursday, he released a Youtube video in which he called the company a “failing mall-based retailer” and listed the reasons why he believed that the company would soon fall to $US20 ($26) per share (instead, it closed at $US43.03 ($56) later that day and rose to $US65 ($84) by end of day Friday).
The drama between the redditors and Left reached a boiling point Friday, however, with Left claiming there had been attempts to hack into his Twitter account and also implying that his family had been somehow harassed. On Twitter he wrote: “We will no longer be commenting on GameStop, not because we do not believe our investment thesis but rather the angry mob who owns this stock has spent the past 48 hours committing multiple crimes that I will be turning over to the FBI, SEC, and other governmental agencies.”
— Citron Research 2 (@CitronResearch2) January 22, 2021
Left doesn’t exactly have a spotless track record himself. After a controversial report on a Chinese real estate developer in 2012 (short-sellers made a bundle while the company was left reeling), Left was ultimately banned from the Hong Kong financial market for allegedly making “false and/or misleading” statements. Earlier in his career, in 1994, he was also sanctioned by the National Futures Association, the self-regulatory body committed to overseeing the country’s derivatives market, as “part of a wider probe” into a firm he was employed with at the time.
While it remains to be seen who will win out, some indicators have suggested the bulls’ party is ending. The Relative Strength Index for GameStop shares – a measure of the stock’s momentum – sat just below 80 following Thursday’s 10% climb. Readings above 70 suggest the stock is overbought, and the index hasn’t landed below that threshold since January 12.
Right now, it’s not totally clear where the stock is headed.