21 septembrie 2024
This makes GameStop the latest company to join the stock-split bandwagon. It is also worth noting that the shares have received a nice boost thanks to this move after underperforming the broader market for most of the year. But brokerages have been making it ever-easier for novices to get into the market and trade. Commissions have dropped to zero, and people can trade on their phones. As each barrier to trading has fallen, consumer advocates cheered the broadening playing field.
- GameStop earlier this week also announced the launch of its digital wallet for holding non-fungible tokens (NFTs) and cryptocurrency, as part of its plan to transform into a much more digitally driven company.
- His contributions form the cornerstone of the Seeking Alpha Quant Rating system, designed to interpret data for investors and offer insights on investment directions, thereby saving valuable time for users.
- Major companies with solid growth prospects haven’t seen a bump in their prices following stock-split announcements.
- He’s also written for Esquire magazine’s Dubious Achievements Awards.
The Motley Fool has no position in any of the stocks mentioned. The company’s results for the first quarter of fiscal 2022 (for the three months ended April 30, 2022) weren’t impressive, either. GameStop reported $1.38 billion in quarterly revenue, representing an increase of 8% over the prior year. However, a closer look indicates that GameStop’s reliance on hardware sales is turning out to be a headwind. But he said it’s difficult to declare it a clear case of market manipulation.
This past year, the squeezes were so amplified because of the small- to mid-cap companies selected. When a smaller company has an extraordinary trading volume, it is amplified compared to a mega-cap company. GME, along with Bed Bath & Beyond (BBBY, $14.06), AMC Entertainment (AMC, $18.84) and seemingly countless others, became meme stock darlings on social media platforms, most notably Reddit’s r/wallstreetbets (WSB) subreddit.
Reddit: Short Interest and Short Squeeze Defined
Looks like the short squeeze really started to kick-in at the end of October. The stock is up 225% from our Very Bullish recommendation in May. Tom Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the highest-tier subscription at InvestorPlace. He is the former editor of Tom Yeung’s Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during the bad.
To their credit, social media investors have identified striking parallels between Troika Media and GameStop. And management at the two companies have engaged in startlingly similar financial restructuring plans. Last year’s meme stock trading frenzy might have come to an abrupt end in 2022, but the market remains rife with high-short-interest stocks that could be ripe for a short squeeze.
But analysts still expect GameStop to keep losing money in its next fiscal year. On the date of publication, Tom Yeung did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. On the other hand, GameStop has been relatively clear about its finances and business outlook. The company has kept top-tier auditor Deloitte & Touche since 2013 and frequently updates shareholders in its detailed earnings calls. CEO Matt Furlong is refreshingly straightforward about GameStop’s prospects.
The next GameStop? 38 heavily shorted stocks that retail investors could target next, according to Goldman Sachs
To fund the $125 million acquisition, Troika turned to Blue Torch Capital, a direct lender specializing in micro-cap companies. The GameStop frenzy may have quieted down, but according to Goldman Sachs, the retail trading boom could happen again soon. GameStop earlier this week also announced the launch of its digital wallet for holding non-fungible tokens (NFTs) and cryptocurrency, as part of its plan to transform into a much more digitally driven company. GameStop is the pioneer of the meme-stock movement that took 2021 by storm, so the stock is heavily susceptible to big random moves up and down. These reasons explain why GameStop’s business has been in a state of decline for a long time now.
Additionally, a split isn’t a guarantee of higher stock prices. Major companies with solid growth prospects haven’t seen a bump in their prices following stock-split announcements. That’s why an investment in GameStop shouldn’t be based on a stock-split move. Instead, investors should closely scrutinize what the company’s future may look like. Investing in stocks, whether long or short positions with a high level of short interest, is extremely risky. The risk is so significant that many traders will not carry the positions overnight and look to re-establish positions each morning.
For over a year, interest in this data point has run strong and speculator’s enthusiasm does not seem to be slowing. They rose to the public eye because of social media platforms like Reddit and Wall Street Bets. By way of background, a short squeeze refers to the rare event where the price of a stock with significant short interest unexpectedly rises. Short Interest reflects the number or percent of shares that have been borrowed by a person or institution and sold short, but have not yet been covered or returned to the rightful owner. The borrower of the stock actually sells the shares (they do not own the shares) and hopes to buy the shares back at a lower price with the intent of returning the shares to the rightful shareholder.
Short interest and the cost to borrow shares are rising.
(To be fair, I also gave a 40% chance that Troika “runs off with all our money” and would be worth zero). Troika Media Group is an acquisitions company that can trace its roots back to Roomlinx, a Nevada-based firm founded in 1998. Over the years, the entity would purchase everything from broadband companies to brand consultancies. It wasn’t particularly successful; the firm averaged a $9.4 million loss per year and required a steady stream of stock and debt issuances to fill the gap.
Meme stocks have taken the world by storm and many Meme stocks have high levels of short interest. Stocks with high levels of short interest are susceptible to short-term price swings. Historically, short interest as a factor (an investment metric) has notoriously been an inferior metric for forecasting stock price predictability. Nevertheless, a short squeeze has the capability to cause powerful stock rallies. „The past 25 years have witnessed a number of sharp short squeezes in the U.S. equity market, but none as extreme as has occurred recently,” Kostin wrote in the note, published on January 29.
He’s also written for Esquire magazine’s Dubious Achievements Awards. When it comes to playing around with high short interest stocks, unless you are uncommonly lucky, let’s just say the risks greatly outweigh the rewards. Biotechs figure prominently on the list, and certainly some of last year’s meme stock favorites continue to hang on. Just be forewarned that this list is for informational purposes only. GME, for example, has lost more than a quarter of its value so far in 2022. Shares in Robinhood Markets (HOOD, $14.40), whose free app became ground zero for meme-stock trading volume, have slumped almost 20%.
They’re ways that investors can make a big profit with relatively small payments up front, if the stock moves in the right way. Many of the traders pushing up GameStop are smaller-pocketed or novice investors. Enthusiasm has grown https://www.wallstreetacademy.net/ for GameStop’s prospects after the company said earlier this month that a co-founder of Chewy, the online seller of pet supplies, was joining its board. Investors see Ryan Cohen helping GameStop’s digital transformation.
If the Quant grades, screens, and portfolio tools are not useful feel free to stick with the Seeking Alpha’s free site. Note that Heron Therapeutics (HRTX, $8.14) currently tops the list. That’s hardly unusual, however, and even something of a throwback to the pre-meme stock days. After all, biotechnology stocks with small market capitalizations have always been targets for short sellers. Heck, short interest in HRTX has been above 10% since mid-2018.
The Next GameStop: Stocks With The Potential For A Sizable Short Squeeze
That’s the same as GameStop’s valuation immediately before its short squeeze and about eight times lower than the average U.S. firm. In other words, it’s a siren’s call for deep-value investors looking for enormous returns. From a trading perspective, Troika Media had around 21 million shares sold short at the end of February, a 72% short interest ratio. That’s roughly the same as GameStop’s elevated 88% figure in January 2021.
My initial assessment of Troika assumed that the firm would act in good faith to keep investors updated about its outsized Series E deal. A Schedule 13D or 8-K filing should have notified shareholders of any significant exercise, since the dilutive effect would be 1) a material event, 2) a 5% or more change in ownership, or 3) both. Instead, it took until March 7 for the firm to retroactively announce in its annual report that its share count had risen over five-fold. Going long on a stock with high short interest thinking you’re going to get rich off panic-buying by short sellers is an exceedingly dangerous idea.
