A screen displays the GameStop logo and trade information on the floor of the New York Stock Exchange (NYSE) on March 29, 2022.
Brendan McDermid | Reuters
Shares of two meme stocks surged Thursday, adding an unexpected wrinkle to a stock market that has been down for more than a month.
GameStop and AMC turned heads early last year when a gang of retail investors coordinated trading in online chat rooms to create massive short squeeze in these stocks widely hated by hedge funds and other players. The lightning-fast rises have inflicted enormous suffering on many hedge funds and other short sellers involved in these speculative names.
Since then, stocks have retreated from their price spikes and short sellers have resumed building positions. According to FactSet, AMC has a short interest of 19.5%, while GameStop stands at 21.4%. Short interest is a measure of what part of a company’s available stock, or free float, is sold short.
Those big bets against the company can sometimes lead to dramatic one-day moves in a stock, as hedge funds move to close their short positions when a stock rises, thus creating more buying pressure. This process is known as short squeeze.
Even with Thursday’s big moves, shares remain well below the highs of the first half of 2021. GameStop, which rose to $ 483 per share on an intraday basis last January, was trading between $ 90 and $ on Thursday. 100 per share.
AMC, which hit an intraday of $ 72.62 last June, was at around $ 12 per share on Thursday.
Because the companies’ market caps have fallen so much, it’s easier for a few trading shops, or even a large fund, to force a new tightening.
In 2021 both AMC Other GameStop took advantage of temporarily high stock prices to sell additional shares and raise capital. Adam Aron, CEO of AMC, made a great effort to embrace the retail investors who participated in the rally, answering questions from small dollar traders during earnings calls, and introducing shareholder benefits in physical cinemas.
AMC used part of the money raised to purchase other theaters across the country. However, the company also acquired a stake in a small gold mining company earlier this year it has a shaky financial history.
– CNBC’s Yun Li contributed to this report