Strong gains in GameStop shares were reminiscent of the WallStreetBets movement in 2021. Are meme stocks now returning?
• GameStop stock at the center of the WallStreetBets movement
• Largest daily percentage gain since November 2023
• Hope for the return of meme stocks
WallStreetBets move sends GameStop stock soaring
Although GameStop, the US retail chain for video games, was founded in 1984, the gaming title received attention on the stock market from 2021 onwards, especially as part of the WallStreetBets movement. The branch network came under increasing pressure due to increasing online trading, numerous hedge fund managers saw no future in the concept and started short positions against the problem child. Small investors reacted to the short sellers and organized themselves in the Reddit subforum WallStreetBets to buy GameStop shares, but stocks from AMC and Bed Bath & Beyond were also increasingly on the purchase lists here. The result of the buying campaign: The price of GameStop shares jumped to unprecedented heights, forcing hedge funds that had bet on a price decline to liquidate their positions in order to limit losses. This “short squeeze” only further increased the price rise.
The shares of GameStop, AMC and other titles discussed on Reddit have since been summarized under the term “meme stocks”.
GameStop shares jump in price
Even though at the beginning of the movement it seemed as if GameStop shares would continue to rise, at some point it ended. The video game seller’s shares are now trading well below their previous highs.
However, yesterday, Thursday, GameStop shares on the NYSE attempted a recovery that was reminiscent of the previous meme rally. By the end of trading, the paper had climbed 16.96 percent to $12.76. This was the largest daily percentage gain since November 29, 2023 – at that time there was an increase of 20.46 percent on the price board. On Friday there was a countermovement in pre-market trading on the NYSE: there was a temporary decline of 2.12 percent to $12.49.
Memories of the meme rally come back
There are no apparent reasons for the sudden price increase. GameStop did not publish any news itself, nor did it provide any new analyzes or valuations.
However, memories of the WallStreetBets movement were already awakened in social networks during the rally. “It was fun to watch. It reminded me of the old days of crazy volatility,” wrote one user on the short message service X (formerly Twitter).
$GME ended up 16.96% on the day. That was fun to watch. It reminded me of the old days of crazy volatility.
– travis_b13 (@the_travis_b13) May 2, 2024
“I like it when old memes come back to life,” added another user. “A short squeeze event is inevitable,” he even predicted.
I like to see old meme stonks waking up.
Short squeeze event is inevitable.#GME $GME #AMC $AMC
– French_AMC_APE (@YassineCorse) May 2, 2024
Sustainable recovery?
However, it is questionable whether the recent price gains are characterized by sustainability. GameStop still has some open construction sites. The company only announced one in March 2024 Job cuts to make the business model profitable again. Last year, CEO Matthew Furlong also had to resign and was replaced by activist investor Ryan Cohen.
Evidence of whether the troubled retail chain will achieve a turnaround could come from its first-quarter fiscal 2024 results, expected in June.
Editorial team finanzen.net
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