How does the GameStop Stock Fever End?

How does the GameStop Stock Fever End?

Globe Live Media, Thursday, January 28, 2021

From Wall Street to the White House, everyone is watching GameStop stocks.

What is happening?

Shares in video game retailer GameStop, which had been left for dead, soared a staggering 135% to $ 347.51 on Wednesday, leaving gains since early January at 1,745%. In the battle between day-to-day traders coordinating on Reddit and hedge funds betting that GameStop stock will collapse, the internet team is winning, at least for now.

It’s not just about GameStop anymore, shares of AMC Entertainment (AMC), Nokia (NOK), Tootsie Roll Industries (TR) and the shell of a bankrupt Blockbuster also soared Wednesday as emboldened small investors looked further.

Earlier this week, I wrote about how the show has caught the attention of Wall Street, forcing the old guard to consider how the democratization of investing via commission-free trading platforms like Robinhood is affecting market dynamics. .

There is much more to say on that front. But for now, there is a big question: how does this episode end?

Shares of companies like GameStop and AMC Entertainment remain extremely volatile in pre-market trading, leaving the immediate fate of the rally unclear. At 7:35 am ET, GameStop shares were up 37% to $ 475.

Outside of the United States, where stocks in popular hedge fund targets like Unibail-Rodamco-Westfield also soared, there were signs of downsizing on Thursday morning. Shares of the European mall owner fell nearly 2% in Amsterdam on Thursday after gaining nearly 20% in the previous session.

However, for hedge funds and short sellers in the melee center, the damage is already done. Melvin Capital closed its position at GameStop this week after suffering a huge loss, CNBC reports. Citron Research’s Andrew Left said in a YouTube video posted Wednesday that he covered most of his short GameStop positions with “a 100% loss.”

Check this out: So far, many on Wall Street are viewing the GameStop saga as a somewhat isolated event. But there are some concerns that Wall Street money managers may need to sell other stocks that they had been planning to hold long-term, for example in Apple or Target, to cover losses. That could affect the broader market, which had its worst day since October on Wednesday thanks to concerns about COVID-19 vaccination efforts and the economy.

Investors are clearly nervous. The VIX, a measure of stock market volatility, spiked nearly 62% on Wednesday, its third-biggest jump in a day on records dating back to 2001. It fell on Thursday but remains high.

Talking about whether regulators should step in and limit this kind of behavior is also on the rise, though to the folks at the Securities and Exchange Commission, it’s not a clear case. Sen. Elizabeth Warren, for her part, is using the incident to renew her call for a crackdown on Wall Street.

“For years, the same hedge funds, private equity firms and wealthy investors dismayed by GameStop’s operations have treated the stock market as their own personal casino while everyone else pays the price,” the Massachusetts Democrat said in a release.

Apple, Facebook and Tesla also made a profit

On a typical day, all eyes would have been on Apple (AAPL), Facebook (FB) and Tesla (TSLA), which reported gains after the US markets closed on Wednesday.

Apple’s most recent quarter was a profit on sales of its new iPhone 12, with revenue hitting a record $ 111.4 billion, well above Wall Street analysts forecast.

Sales of iPhones grew more than 17% year-over-year to nearly $ 65.6 billion, fueling hopes that the company’s profits will spike in 2021 by a flood of people rushing to upgrade their devices.

Meanwhile, Facebook said revenue increased 33% to about $ 28 billion during the quarter, showing the durability of its core advertising business despite the pandemic. By combining the various Facebook apps, including Instagram, Messenger, and WhatsApp, the company reported 3.3 billion monthly active users, an increase of 14% year-over-year.

Tesla told investors that it had achieved its first full year as a profitable company and promised to increase sales growth by more than 50% by 2021.

“2020 was a watershed year for us on many levels,” said Chief Executive Elon Musk. “Despite a challenging environment … we delivered almost as many cars last year as we produced in our entire history.”

Still, nervous investors don’t seem impressed. Shares of Apple were down 1.7% in premarket trading, while shares of Tesla were down 5%. Facebook shares also fell.

Samuel Edwards
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