The New York Stock Exchange (NYSE) has imposed a Short Sale Restriction (SSR) on GameStop following a dramatic spike in short sales, reminiscent of the company’s infamous short squeeze in 2021. On March 27, GameStop (GME) saw its short sales volume soar by 234% within a 24-hour period, bringing the total to 30.85 million shares as reported by TradingView.
The SSR is activated when a stock’s price falls more than 10% from the previous day’s close. In this instance, GameStop’s stock plummeted by 22% over the course of the trading day, erasing the gains accrued from a recent Bitcoin announcement. At the time of writing, GME was trading at $22.09.
Short Sale Volume Echoes 2021 Levels
This SSR will be enforced for the remainder of the trading day and the following day. Kevin Malone, president and CEO of Malone Wealth, noted that GameStop traded 50 times more shares on this day compared to the prior Thursday, suggesting the presence of naked short-selling.
The recent short sales figures draw parallels to those seen in January 2021, during the time of the significant short squeeze that resulted in steep losses for hedge funds and substantial returns for some retail investors. On January 19, the short sales volume peaked at 33.26 million shares.
GameStop’s Bitcoin Investment: A Controversial Move
Following the market’s close on March 26, GameStop announced a $1.3 billion convertible notes offering, the details of which remain vague concerning their plans for Bitcoin acquisition. Analysts have raised concerns about this strategic pivot, with Tastylive’s Tom Sosnoff labeling GameStop’s foray into Bitcoin as “a little dot-comish.”
Sosnoff’s observation suggests a significant shift, emphasizing how the company’s Bitcoin strategy may appear speculative rather than grounded in a robust business model. Similarly, Bret Kenwell, an investment analyst at eToro, expressed that investor sentiment towards the company’s underlying business remains lukewarm.
The Legacy of Short Sales
The largest volume of short sales remains attributed to June 3, 2024, when the figure reached 46.20 million. This surge coincided with the return of Keith Gill, a well-known figure from the 2021 short squeeze, who revealed substantial trading activity in GameStop stock with a $180 million backing.
Consequently, GameStop’s strategy of utilizing convertible senior notes—debt convertible into equity—has been cited as a contributing factor to its declining stock price. Analysts like Han Akamatsu have drawn parallels with prior instances, suggesting that if Bitcoin or GameStop sees an uptick, the market landscape could lead to new squeezing opportunities.
This significant moment for GameStop reflects broader market trends and investor sentiment, emphasizing the need for strategic caution amidst a landscape filled with volatility and potential. The dynamics of the stock market continue to evolve, and companies must adapt their strategies thoughtfully to navigate these turbulent waters.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
