Whether you’re looking for information on GameStop’s share price, or you’re just curious about this company, there are a few things you should know. First, it’s a well-known American consumer electronics and video game retailer. Second, it has a lot of short interest. Third, the stock has recently undergone a split, which could potentially cause a rally.
The stock split may lead to a rally
Several companies have split their shares in recent months, including Alphabet (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN). The most notable example is the 20-for-1 stock split by Google’s parent company. It’s a well-known fact that shares have typically rallied after a split.
However, a company’s share price will not necessarily increase, as it is determined by supply and demand. A stock split increases accessibility to the stock for smaller investors, which is often the primary driver of a stock rally.
GameStop has made some important moves that are drawing the attention of investors. It has announced plans to launch a new NFT marketplace, invested in cryptocurrency, and hired former Amazon executives to serve as CEO and chief financial officer. It has also filed with the Securities and Exchange Commission to request authorization to increase the number of class A shares.
In addition to these major moves, the stock price has remained volatile, but the company has managed to keep a steady upward trend. The stock is up more than 40% in March.
Short interest stands at around $1.3 billion
Despite an awe-inspiring Q3 earnings rally, investors still need to worry about the short squeeze. According to data from S3 Partners, GameStop’s short interest stands at around $1.3 billion. It’s not a big deal, since the company is one of the most affordable stocks to short. But it’s important to consider the timing of the stock’s resurgence.
The recent aforementioned Q3 earnings rally saw shares rise nearly 50% in a few days. During the short-lived buying frenzy, many new short-sellers entered the market at high borrowing rates. These new accounts are often reverted by the time investors change brokers.
During the run-up, many individual investors discovered that they had never owned a single share of the stock. This revelation came after brokers shut off the buy button. Luckily, they were not at risk of bankruptcy. However, it wasn’t long until they began complaining about margin accounts reverting. This prompted many individual investors to leave their brokers.
Technical analysis does not look good for GameStop shares
Using technical analysis, we can examine the chart of GameStop (GME) stock. Its price has fallen over 4/5 times, and it has already broken critical support levels. This is a sign that GameStop’s market is in free fall.
In early February, GameStop’s share price increased dramatically. Many Reddit users had purchased shares of the company after hedge funds announced that they were shorting the stock. The sudden run-up in price forced some of the hedge funds to cover their positions and buy the stock back.
As a result, some of the GameStop investors had to sell their shares, and the price of the stock fell. The investors were not familiar with the size of professional investor positions. These types of positions often use options, which have embedded leverage. The long positions are financed with borrowed money.
The GameStop stock was traded at less than $50 a share in mid-February. This was a result of irrational exuberance. Some investors are wondering if GameStop is still worth investing in.
GameStop’s ‘Meme Stocks’
Several months ago, the stock price of GameStop (GME) rose by a staggering 1,800 percent. The rise came as a result of a dramatic short squeeze. The company’s shares had been heavily shorted as a result of falling revenues.
Amid the rising stock prices, a few big-name investors took big positions in the stock. Elon Musk and Chamath Palihapitiya were among these investors. However, their investments were quickly halted by heavy losses.
In January 2021, the short interest in GameStop’s shares reached more than 100%. The company had a large debt load, and foot traffic at its malls was dwindling. It was also saddled with lease liabilities.
The retail trading of the stock picked up, and a number of investors joined the fray. No-fee trading apps helped facilitate the trades. The stock’s share prices were driven higher by public figures and big-name investors.
Then, in October, the company’s stocks saw the largest 12-day gain in public history. It was a testament to the popularity of the stock.
