GameStop shares more than doubled in afternoon trading on Wednesday, surprising those who thought the video game retailer’s stock price would stabilise after a fierce rally and steep dive that upended Wall Street in January.
The shares soared nearly 104% during the session in which trading was halted several times, then jumped another 85% after hours.
Other so-called “stonks” – an intentional misspelling of “stocks” – favoured by retail traders on sites such as Reddit’s WallStreetBets, also shot higher. AMC Entertainment gained 18%, Koss rallied more than 50% and BlackBerry rose nearly 9%. Shares of Canadian cannabis company Tilray gained nearly 13%.
Analysts could not pinpoint one reason for the sharp move. At least one ruled out a short squeeze like that which fired the “Reddit rally” in January when small investors bought GameStop furiously to punish hedge funds that had bet against the retailer.
Some Twitter users pointed to an activist investor’s tweet of an ice cream cone picture. Others cited factors including a reshuffling of top executives and options trading.
Shortly before 2pm, the activist investor Ryan Cohen, a major shareholder of GameStop and founder of Chewy.com, tweeted a picture of a McDonald’s ice cream cone with a frog emoji. Some GameStop bulls wondered online whether it was a veiled message that Cohen would fix GameStop’s business, like the fast-food chain fixed its ice cream machines.
“I don’t know what an ice-cream means,” said Michael Pachter, an analyst covering GameStop at Wedbush Securities. “People are looking for signals.”
Others pointed to the resignation of GameStop chief financial officer, Jim Bell, as the company focuses on shifting into technology-driven sales.
“GameStop announced the resignation of its CFO last night. Some may have taken this as a good sign that RC Ventures is making a difference at the company in terms of trying to accelerate the shift to digital,” said Joseph Feldman, an analyst at Telsey Advisory Group.
Stephanie Wissink, analyst at Jefferies Research cited her research report noting that Bell resigned after the company settled with activist investor Ryan Cohen’s RC Ventures. Her note said the chain of stores would likely signal a change in business model by going after “a CFO with a more extensive tech (vs. retail) background.”
Ihor Dusaniwsky, managing director of predictive analytics at analytics firm S3 Partners, said short covering was “not the predominant reason for this price move”.
“It’s mostly long-buying with short-covering sprinkled in,” Dusaniwsky said.
Fewer than 18m GameStop shares were shorted as of Tuesday, down from over 70m in early January, according to S3.
Some said options trading may have amplified the move.
Henry Schwartz, head of product intelligence at Cboe Global Markets, said the most active options contracts for GameStop were in calls around the $50 and $60 strike prices, expiring Friday.
Schwartz said, adding that when the stock started jumping after 2:30pm, whoever was short those contracts may have had to buy GameStop stock to hedge their position.
GameStop devotees on Reddit’s popular WallStreetBets forum expressed surprise.
“Why is GME going up?” one retail trader asked on WallStreetBets. “Because we like the stock”, another replied.
Another user posted: “I missed out on GME the first time, I*m not making that mistake again. TO THE MOON”.