Shares of U.S. videogame retailer GameStop (NYSE:GME) continue to trade at improbable levels.
On Monday, GameStop’s stock surged as much as 144%, touching another record high after surging nearly 250% since the beginning of the year. The stock pared gains and closed trading Monday at $76.79 a share. Trading was halted for volatility shortly after the opening bell.
Traders said short-sellers were quickly buying back into the stock to cover potential losses, defined as a "short-squeeze," and retail investors were piling in to benefit from the surge in the stock price.
Some investors had bet against GameStop, viewing its retail business model as outdated at a time when video game sales are increasingly online. The short betting was evident from the fact that 100% of the shares available to borrow to speculate against the company are already out on loan.
Short sellers typically borrow and sell shares in companies they expect will fall in price, hoping to buy them back at a lower price and pocket the difference. But GameStop shares began to rise as investors cheered the video game retailer's announcement on January 11 about appointments to its board to double down on digital sales.
Last week, short-seller Citron Research said the stock would be "back to $20 fast." Volume has also surged in GameStop options, hitting a record of 2.13 million contracts on Friday. On Monday, about 355,000 GameStop options contracts had traded, about four times expected volume, according to Trade Alert.
Among the eight analysts who cover the stock, four rate it a "hold" and the rest recommend to "sell." The median price target on GameStop stock is $12.50 a share, a more-than-80% discount to current levels, according to Refinitiv data.
