Massive Short Squeeze Sends GameStop Soaring 80%

GameStop Corp. GME shares skyrocketed more than 80% on Wednesday before pulling back in what is likely the largest short squeeze of 2021 so far.

What Happened? GameStop reported no major news on Wednesday, suggesting the massive rally in the stock was simply a textbook short squeeze.

Why It’s Important: On Monday, GameStop reported $1.77 billion in revenue over the nine-week holiday shopping season, up 3.1% from a year ago. Same-store sales were up 4.8%. GameStop said it benefited from a 309% jump in online sales compared to a year ago.

GameStop shares initially reacted positively to the holiday sales numbers earlier this week, but Wednesday’s rally appears to be more driven by technical market conditions than any news headlines or company fundamentals.

Related Link: Short Sellers Fleeing Netflix, Alphabet And Other Tech Stocks Heading Into 2021

What Is A Short Squeeze? A short squeeze occurs when a group of short sellers close (or "cover") their short positions in a heavily-shorted stock all at once by buying back shares. The demand for shares from short covering drives prices higher, often leading to more short covering.

As of late November, GameStop was one of the most aggressively shorted stocks in the market, according to S3 Partners analyst Ihor Dusaniwsky. At the time, S3 estimated GameStop’s short interest at around $986.1 million, or a whopping 145.8% of its float.

Perhaps many of these short sellers were betting on a weak holiday season for GameStop and are exiting their positions following Monday’s news.

The video game retailer also announced the recent addition of three new GameStop board members from activist investor RC Ventures. Baird analysts said the new board configuration could suggest the company is accelerating its digital transformation plan.

Alternatively, there could be something happening behind the scenes with GameStop that leaked out and has not yet been covered in the financial news media.

Benzinga’s Take: Whatever the reason, something appears to have triggered a massive short squeeze, and GameStop has plenty of shorts to squeeze.

Traders should be extremely careful trying to time the squeeze and any potential pullback. Short squeezes are notoriously volatile and unpredictable, even to some of the most experienced stock traders.

Photo by Dwight Burdette via Wikimedia

Posted In: Ihor DusaniwskyRC VenturesS3 PartnersNewsTop StoriesMoversTrading Ideas

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.