GameStop shares soar 93 percent as Wall Street frenzy continues

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Individual investors continued to pile into niche stock market plays on Tuesday, causing a scramble by short-seller funds to cover losing bets, with companies like GameStop skyrocketing 93 percent — the fourth straight day of increases — even as others caught up in the buying frenzy reversed gains.

Etsy was up as much as 8.6 percent in GameStop’s slipstream but later reversed its gains, and BlackBerry was another early buying focus in this increasingly influential corner of Wall Street.

The surge in recent days — GameStop has increased more than sixfold from $19 since Jan. 12, while BlackBerry has shot up 172 percent this year — has spurred concerns over bubbles in stocks that hedge funds and other speculative players had bet will fall in value.

Trading of GameStop stock was halted for volatility nine times on Monday and three times on Tuesday.

To some on Wall Street, the moves have also begun to 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.

“This is hardly an environment where informed investors are transacting to establish price discovery,” said Mike O’Rourke, chief market strategist at JonesTrading.

The benchmark S&P 500 has gained more than 70 percent since March, with analysts putting moves in share prices of several loss-making firms down to herds of amateur investors chasing tips from Reddit discussion threads or the private Facebook group “Robin Hood’s Stock Market Watchlist”.

“I don’t think this is a fad, it is a generational shift in how people think about investing their money,” John Patrick Lee, ETF manager at VanEck.

“A retail trader will not lean on Wall Street to manage their money and I definitely now see an antagonistic relationship between the old guard (Wall Street) and individual traders who are on the rise,” he said.

Venture capital investor Chamath Palihapitiya said in a tweet that he had bought $115 call options on GameStop on Tuesday morning after an exchange with Reddit founder Alexis Ohanian.

GameStop gained $71.19 to $147.98, below Monday’s intraday high of $159.18, but extending its winning streak to a fourth straight session.

According to analytical firm S3 Partners, short sellers in GameStop are down $5 billion on a mark-to-market, net-of-financing basis in 2021, which included $876 million of losses early Tuesday.

“GME shorts and longs are in a knockout battle being waged in the stock market as well as social media platforms,” wrote Ihor Dusaniwsky, S3’s managing director of predictive analytics.

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