GameStop short sellers lost almost $1 billion in Monday’s monster rally

The
jaw-dropping
rally
in GameStop on
Monday
caused
losses
approaching
$1billion
for
short
sellers,
according
to
data
from
S3
Partners.

With
GameStop
soaring
74%,
short-selling
hedge
funds
suffered
a
mark-to-market
loss
of
$838
million
in
the
brick-and-mortar
video
game
retailer,
data
firm
S3
Partners
said.

“Expect
short
covering
in
this
stock
as
it
already
had
a
100/100
squeeze
score
prior
to
today’s
trading,”
said
Ihor
Dusaniwsky,
S3
managing
director
of
predictive
analytics. 

The
sudden
advance
in
the
stock
was
seemingly
triggered
by “Roaring
Kitty,”
who
once
encouraged
an
army
of
day
traders
to
pile
into
the
gaming
stock
in
2021,
an
episode
that
made
Wall
Street
history.
The
internet
persona,
whose
legal
name
is
Keith
Gill,
posted
a
picture
on
X
of
a
video
gamer
leaning
forward
on
their
chair
as
if
to
indicate
he’s
taking
the
game
seriously,
making
his
first
post
on
the
platform
since
2021.

The
“meme
stock”
frenzy
involved
individual
investors
taking
aim
at
short
sellers
and
hedge
funds
who
were
pessimistic
about
the
outlook
for
GameStop
and
other
companies,
forcing
them
to
cover
their
short
positions
and
drive
up
the
price
of
the
target
stocks. 

Currently,
the
short
position
in
GameStop
shares
amounts
to
more
than
24%
of
all
its
shares
that
are
freely
available
to
trade,
also
known
as the
float,
according
to
FactSet.

Including
Monday’s
losses,
short
sellers
in
GameStop
have
lost
$1.24
billion
in
May
alone,
according
to
S3.

“Squeeze
related
buy-to-covers
will
be
helping
to
push
GME’s
stock
price
higher
–
but
also
expect
new
short
sellers
to
jump
into
this
trade
as
GME
stock
prices
around
or
above
the
$30
level
will
be
attractive
entry
points
for
new
short
selling,”
Dusaniwsky
said.

Short
selling
is
a
strategy
in
which
investors
borrow
shares
of
a
stock
at
a
certain
price
in
expectations
that
the
market
value
will
fall
below
that
level
when
it’s
time
to
pay
for
the
borrowed
shares.

GameStop
was
not
the
only
meme
stock
that
was
on
the
rise
Monday.


AMC
jumped
15%,
while


Reddit
traded
9%
higher.

“Short
sellers
may
be
in
for
a
bumpy
and
bloody
ride
in
these
stocks,”
Dusaniwsky
said.

—
CNBC’s
Scott
Schnipper
contributed
reporting.