GameStop shares up 250% in two days. Here we go again?
GameStop shares surged before the start of U.S. trade on Thursday, with the stock more than tripling over the last two days. The so-called meme stock, publicly listed companies that have generated buzz via social media networks like Reddit, isn't profitable and its sales tumbled 30% in the third quarter.
That isn't putting off investors. Shares of GameStop soared $66, or 73%, to $158.21 in pre-market trading. Other stocks embraced on social media in recent weeks are also jumping, including headphone maker Koss, which climbed 85% before markets opened Thursday and theater chain AMC entertainment, up 16%.
GameStop's wild ride has been fueled by amateur investors on Reddit's WallStreetBets message board, who on Thursday morning were encouraging each other to bid the stock higher. One user claimed that if the stock hits $800, Reddit users could create "the mother of all short squeezes." That refers to situation when investors who have "shorted" a stock — or bet that its price will decline — are forced to buy shares, which can send the stock higher.
GameStop's saga sparked a congressional hearing last week over its dizzying January rally, which prompted trading app Robinhood to block purchases of the stock and angered customers.
"I am not certain that there's another short squeeze going on like the one before. However, there are probably some funds who stayed short assuming the dust would settle," said Gust Kepler, CEO of stocks and options platform BlackBoxStocks.
Another possible reason for GameStop's sudden surge: The Grapevine, Texas-based company announced Wednesday that its chief financial officer will be resigning on March 26.
"The CFO exited the company and there's talk of the company finally transforming from a brick and mortar to deploying their product in a digital way, and this is why we believe the stock shot up at the end of the day today," Kepler said.
With reporting by the Associated Press.