- Title: 'It's a pyramid scheme,' analyst says about GameStop shares rally
- Date: 27th January 2021
- Summary: LOS ANGELES, CALIFORNIA, UNITED STATES (JANUARY 27, 2021) (REUTERS VIA ZOOM) (SOUNDBITE) (English) WEDBUSH SECURITIES, MANAGING DIRECTOR, EQUITY RESEARCH, MICHAEL PACHTER, SAYING: "We can think that maybe Ryan Cohen is going to take their sales from five billion to $20 billion, but no, he's not. I mean, what's going to cause people to go to the store? Not 'wallstreetbets'
- Embargoed: 10th February 2021 22:25
- Keywords: investors shares short betting short sellers short squeeze stock traders videogame retailer GameStop
- Location: NEW YORK, NEW YORK, AND LOS ANGELES, CALIFORNIA, UNITED STATES / INTERNET
- City: NEW YORK, NEW YORK, AND LOS ANGELES, CALIFORNIA, UNITED STATES / INTERNET
- Country: USA
- Topics: Company News Markets,Economic Events,United States
- Reuters ID: LVA00BDWZE53B
- Aspect Ratio: 16:9
- Story Text: Videogame retailer GameStop climbed on Wednesday (January 27), as individual investors again piled into a number of niche stocks, prompting short sellers to scramble to cover losing bets.
Amateur investors bought further into niche stocks, sending professional short sellers, such as hedge fund Melvin Capital, scrambling to cover losing bets, with GameStop skyrocketing for a fourth straight day, thanks in part to Elon Musk.
GameStop surged 50% in extended trade on Tuesday (January 26) after Musk tweeted "Gamestonk!!", along with a link to Reddit's Wallstreetbets stock trading discussion group, where supporters affectionately refer to the Tesla CEO as "Papa Musk."
"Stonks" is a tongue-in-cheek term for stocks widely used on social media.
GameStop's after-hours surge added to a 93% jump during Tuesday's roller coaster trading session, with the videogame retailer's stock propelled by traders on Wallstreetbets, many of them buying volatile call options.
The share spikes of the last few days are raising questions about potential regulatory clampdowns from the U.S. Securities and Exchange Commission.
The SEC declined comment.
Herds of amateur investors on Reddit have long been supporters of Tesla and other hyper-volatile stocks, and their influence appears to be growing.
As well as GameStop, BlackBerry, also favored on Wallstreetbets, advanced 4.9% and is up 185% this year.
An earlier tweet by Musk sent Etsy up almost 9% before it reversed its gains.
The surge in recent days - GameStop has increased more than seven-fold to $147.98 from $19 since January 12th - has spurred concerns over bubbles in stocks that hedge funds and other speculative players had bet would fall in value.
Trading in GameStop stock was halted for volatility nine times on Monday (January 25) and five times on Tuesday.
To some stock market professionals, the recent moves look symbolic of a stock market that may be overvalued at the end of a year dominated by floods of fiscal and monetary stimulus to ease the coronavirus crisis.
The benchmark S&P 500 has gained more than 70% from lows last March caused by the coronavirus pandemic.
(Production: Aleksandra Michalska) - Copyright Holder: REUTERS
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