Stubbornness continues: unusual movement in GameStop stocks:
The debate on social media and forums has turned into stubbornness in the stock market. The share value of the US game retailer GameStop, which dropped to $ 2 in April in the pandemic, saw $ 136 before the session opening today. The company has been at a loss for years.
The rise in GameStop stocks in the US, which is an interesting example of speculative movements in the stock markets, continues today.
Shares of GameStop, a video games retailer listed on the New York stock exchange, gained over 100 percent in pre-session transactions.
According to Bloomberg's report, the share value, which closed last week at $ 65, saw $ 136 before the session today.
LOST REVENUE FOR YEARS, EXPLAINED LOSS IN 2019
GameStop, which has around 5 thousand 500 stores in the USA, has been experiencing a loss of turnover in recent years due to the game industry's shift to the internet. Finally, in the first 9 months of 2020, the company announced a 31 percent turnover loss due to the pandemic.
The company announced a loss of $ 471 million in 2019, and lost every quarter during the pandemic period.
The share value, which declined to $ 2.57 in April 2020 in parallel with the loss of turnover, is the company year, with the effect of both the flow of money taps opened by the Federal Reserve (Fed) to the stock markets with zero interest and the purchases of individual amateur investors from social media and forums. He closed it with a share value of $ 18.
SHARES FLY ON THE WORD OF 'Sucker'
With the effect of discussions and news on the forums, especially Reddit, the interest of small investors increased and GameStop shares increased to over $ 40 on Tuesday.
Thereupon, messages from the social media accounts of Citron Research, the famous short-selling company, claiming that the value of GameStop shares could only be $ 20 and those who bought these shares at $ 40 levels were described as "suckers".
The controversy then grew and the stock closed the day at $ 65 after rising to $ 76 sometime Friday.
The share value of the company, which was $ 1.3 billion at the end of 2020, reached $ 4.5 billion.
The trading volume in GameStop shares on Friday exceeded $ 8 billion.
STEP BACK FROM THE CITRON FOUNDER
Small amateur investors, who are engaged in online trading, aimed to increase the share price and to hurt those who played the decrease in the share price, such as Citron, and to remove them from the short position.
Thereupon, Andrew Left, the founder of Citron, stated that he received threats and insults and that there were attempts to hack his account and that he would not comment on the shares of this company.
GameStop, which the world is talking about, also came to the crypto money market with FTX
The tokenized version of GameStop stocks, which has come to the fore with the dramatic price increases in recent days and the loss of large funds one after another in short positions, has been opened to trading on FTX.
Shortly after being listed, the GME spot volume in FTX rose to over $ 145k, and the futures volume reached $ 1.3 million.
FTX reported that there have been many requests from users to list GME and that the request has been responded to. The exchange recently opened Coinbase's tokenized shares prior to the public offering.
GameStop is a video games vendor listed on the New York Stock Exchange. The company's shares have increased by 1000% this month.
GameStop, which has thousands of stores in the USA, has been losing value in recent years with the game industry shifting to the online system. The shares of the company, which constantly announced losses during the pandemic period, attracted the attention of retail investors with a discussion that started on Reddit and the effect of social media.
While the power of forums and social media is once again important, experts point out that it has become a symbol of the power of the small investor.
GameStop is expected to lose money this year and next year. Sales growth slowed as video game players felt less need to visit stores. Consumers can now download the games they want directly to their game consoles, computers or phones. Why did the video game retailer's stock rise by over 275% in 2021? The company can thank a group of loyal investors who continue to defend the company's shares on Reddit.
However, Wall Street is told that GameStop stocks were overvalued and preceded by a sharp decline. On Monday, GameStop shares showed extremely high volatility and came to a standstill several times. Shares more than doubled at one point and closed the day with an increase of 18%.
According to CNN's report, the people who wrote under Reddit's WallStreetBets (WSB) headline were fervently defending the company. As a result, there was a short selling squeeze in GameStop stocks. Many investors, thinking that GameStop shares will decline in the last period, bought shares and sold the shares in hopes that they could repurchase the shares at a lower price.
This is a very risky strategy. When a stock spikes, short sellers must rush to buy back their stock collectively. The higher a short-sold stock rises, the greater the losses if the short-selling investors do not buy back shares to compensate for their position. This stands out as the main reason that creates the compression.
Citron Research, an investment firm that often identifies shares that it considers to be traded above its value and therefore considered good candidates for short selling, has learned quite painfully what can happen when investors push up a stock by squeezing it through short selling.
In a report earlier this month, Citron's Founder Andrew Left described GameStop as a "failed mall-focused retailer" and predicted that the company's shares would drop to $ 20. During this period, GameStop's stocks were trading at $ 40. The company's shares rose to $ 65 on Friday and are now trading at $ 100.
The bull market supporters who defended GameStop very loudly on Reddit showed how dangerous stocks are, which are a significant fan base for investors. BlackBerry (BB), one of the favorites of Reddit's WSB page, has also risen this year.
Some overly optimistic GameStop investors are even considering earning returns by selling products that support the rally seen in the stock. JonesTrading's Chief Market Strategist Mike O'Rourke said in a report he wrote on Monday that some products celebrate the rise of shares on Etsy. Of course, there are some reasons for the rise of GameStop outside of support from Reddit.
GameStop doesn't just sell games. The company also sells pop culture collectibles such as Star Wars toys and Funko figures. Thus, customers who are not game lovers also visit the company's stores. GameStop announced in the early days of this month that store sales increased by 5% in the last period of 2020 and digital sales rose by more than 300%.
However, overall sales data still came low. The primary reason for this was the temporary closure of the stores due to the increase in corona virus cases in December. At the same time, there were some disruptions in the supply chain due to the high demand for the new Play Station 5 and Xbox.
In a statement released this month, the company said Ryan Cohen, founder of online pet products chain Chewy, will also be on the board of GameStop, along with two former Chewy executives. Cohen's company called RC Ventures is one of the biggest investors of GameStop.
In the press release from GameStop, it was stated that "these three new managers bring deep knowledge in e-commerce, online marketing, finance and strategic planning." Still, some investment experts are concerned that the rise in GameStop's stock is too fast and too much, and they think it could be another sign of the sudden bubble and speculative frenzy seen across the stock markets.
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