Elon Musk Adds Fuel to the GameStop Fire

He simply tweeted 'Gamestonk!!'
By Kate Seamons,  Newser Staff
Posted Jan 27, 2021 12:15 AM CST
Elon Musk Adds Fuel to the GameStop Fire
A woman wears a face mask as she walks past a GameStop store in Des Plaines, Ill., on Oct. 15, 2020.   (AP Photo/Nam Y. Huh, file)

It's "a head-scratching David and Goliath story," as the AP puts it, and Elon Musk on Tuesday lobbed a rock in the giant's direction. Musk tweeted a single word, "Gamestonk!!"—and it was enough to send GameStop's share price temporarily over the $200 mark in after-hours trading. This after the stock closed at $148 a share Tuesday, no small feat when you consider the video game retailer was trading at less than $18 a few weeks back. So what's going on? Well, those Davids and Goliaths. The latter are investors who've watched GameStop inch toward its potential demise as more games move online: Over the last 12 quarters the company has lost $1.6 billion, and investors who thought the stock would keep sinking shorted the stock. The only way they profit in that scenario is if the share price keeps falling, and that's what investors tied to the WallStreetBets subreddit are trying to make sure doesn't happen—so far with success.

CNET explains that the subreddit's members decided to quickly snatch up shares, which moves the price up. But the large pool of short sellers then come into play. It explains the "hitch": As the share price surges, the short sellers "are forced to buy even more stock to cover their losses. That pushes the stock up even more." CNN reports GameStop is up more than 680% in 2021, with much of the "frenzied runup" happening in the last four trading sessions. It did see gains on Jan. 11 on its own merits, when the company named three new directors to its board with an eye on turning things around. But since then it's been wild: It surged 51% on Friday, "a larger gain than big stocks like Apple or Exxon Mobil have ever had in a day"—only to have it close up at 92% Tuesday. CNBC cites data that puts short sellers' "mark-to-market loss" in the stock for the year at more than $5 billion but notes they "aren't backing down." (Read more GameStop stories.)

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