Retail traders piled into heavily shorted shares of GameStop on Wednesday, which had already gained 276% in the past five days. According to Bloomberg, the Wednesday trading frenzy was propelled by Elon Musk’s “Gamestonk!!” tweet with the stock hitting $365.42 in early morning, up from $40 a week ago.
- Analysts believe Musk’s tweet sparked speculations on Reddit, which led to a buying frenzy on GameStop stock.
- Retail traders also band together, searching the internet for other bygone ’90s-era companies sparking buying frenzies in other heavily shorted names like AMC Networks, Macy’s, and Dillard’s.
- #SaveAMC trended on Twitter, with Barstool Sports founder Dave Portnoy saying he is buying AMC and “rooting to put the hedge funds out of business.”
- The retail traders turned tables on short-sellers, inflicting heavy losses to big institutions such as Melvin Capital and Andrew left and even threatened they are not finished yet.
- In response to the trading frenzy, Mike Zigmont, head of trading and research at Harvest Volatility Management, lamented that “the fundamentals don’t matter, numbers don’t matter.”
- Matt Maley, chief market strategist at Miller Tabak + Co., believes speculative retail buying of heavily-shorted stocks led to the S&P 500 decline as hedge funds became worried and started to sell some stocks to meet their margin calls.
- The retail frenzy caused outrages as online trading brokerages limited trading on GameStop, AMC, and others.
- Regulatory scrutiny was also initiated, with Senator Elizabeth Warren pressuring financial regulators to crack down on Wall Street.
- The Securities and Exchange Commission (SEC) said it is “actively monitoring the on-going market volatility in the options and equities markets.”
GameStop is currently gaining. GME: NYSE is up 61.15% on premarket.
