bearish bettors lose big

GameStop (GME) stock saw a spectacular rally yesterday, handing bearish punters colossal losses of over $2.53 billion. What happened ?

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GameStop (GME): briefly squeezes it lose 2.53 billion

GameStop (GME) stock exploded 74% today yesterday, liquidating bearish bettors for a total of $2.53 billionaccording to Fox Business.

The GameStop ( GME ) price spike was sparked by “Roaring Kitty,” an Internet character already well-known in the financial world. In particular, he urged an army of day traders to rush into GameStop stock in 2021, a watershed moment in Wall Street history.

Roaring Kitty, whose real name is Keith Gill, recently posted a photo on X of a player leaning forward in his chair, suggesting that he takes gambling on GME shares very seriously. This is his first release on the platform since 2021.

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According to research firm S3 Partners, the majority of these bearish bets (shorts) came from hedge funds that had bet on the underperformance of the famous video game retailer. For Ihor Dusaniwsky, general manager for predictive analytics at S3, the forced liquidation (short squeeze) is not far away.

“Expect buyback of short positions on this stock as it already had a 100/100 short squeeze score prior to today’s session. ยป

As a result, the volatility of the GME share has been such that The New York Stock Exchange (NYSE) has had to suspend trading in the latter on several occasions.

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Heading for a return of the “meme shares” phenomenon?

The phenomenon of “meme stocks”, equivalent of memecoins to cryptocurrencies, had already made a noise in the financial world in 2021.

Retail investors pounced on hedge funds, which at the time were pessimistic about the future of GameStop and other companies, forcing them to buy back their short positions and driving up the stock price.

According to financial data management firm FactSet, short positions in GameStop stock represent more than 24% of all shares freely available for trading (the float),.

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According to Ihor Dusaniwsky, CEO of S3, these short squeezes are beneficial for GME shares.

“Squeeze-related buybacks of short positions will help drive GME stock higher, but also expect new short sellers to enter this trade, as prices around or above $30 will be interesting entry points for new shorts.”

Short selling is a trading or investment strategy that involves borrowing a company’s shares for a certain value while betting that their price will fall. The goal is to buy back the shares at a lower price later and return them to the lender, saving the difference.

GameStop wasn’t the only “meme stock” to rise on Monday, May 13. AMC Entertainment Holdings ( AMC ) stock advanced 15%, while Reddit ( RDDT ) rose 9%.

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Source: CNBC

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