{"id":105538,"date":"2021-01-26T20:44:41","date_gmt":"2021-01-26T20:44:41","guid":{"rendered":"https:\/\/fin2me.com\/?p=105538"},"modified":"2021-01-26T20:44:41","modified_gmt":"2021-01-26T20:44:41","slug":"wall-streets-retail-frenzy-deepens-as-gamestop-extends-rally","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/wall-streets-retail-frenzy-deepens-as-gamestop-extends-rally\/","title":{"rendered":"Wall Street's retail frenzy deepens as GameStop extends rally"},"content":{"rendered":"

(Reuters) – Individual investors continued to pile into niche stock market plays on Tuesday, causing a scramble by short-seller funds to cover losing bets, with companies like GameStop skyrocketing for the fourth straight day even as others caught up in the buying frenzy reversed gains.<\/p>

A man walks past a GameStop store in Austin, TX, U.S., March 26, 2018. Picture taken on March 26, 2018. REUTERS\/Mohammad Khursheed<\/figcaption>

Etsy was up as much as 8.6% in GameStop\u2019s slipstream but later reversed its gains, and BlackBerry was another early buying focus in this increasingly influential corner of Wall Street.<\/p>\n

The surge in recent days – GameStop has increased more than six-fold to about $122 from $19 since Jan. 12, while BlackBerry Ltd has shot up 172% this year – has spurred concerns over bubbles in stocks that hedge funds and other speculative players had bet will fall in value.<\/p>\n

Trading of GameStop stock was halted for volatility nine times on Monday and three times on Tuesday.<\/p>\n

To some on Wall Street, the moves have also begun to look symbolic of a stock market that may be overvalued at the end of a year dominated by floods of fiscal and monetary stimulus to ease the coronavirus crisis.<\/p>\n

\u201cThis is hardly an environment where informed investors are transacting to establish price discovery,\u201d said Mike O\u2019Rourke, chief market strategist at JonesTrading.<\/p>\n

The benchmark S&P 500 has gained more than 70% since March, with analysts putting moves in share prices of several loss-making firms down to herds of amateur investors chasing tips from Reddit discussion threads or the private Facebook group \u201cRobin Hood\u2019s Stock Market Watchlist\u201d.<\/p>\n

\u201cI don\u2019t think this is a fad, it is a generational shift in how people think about investing their money,\u201d John Patrick Lee, ETF manager at VanEck.<\/p>\n

\u201cA retail trader will not lean on Wall Street to manage their money and I definitely now see an antagonistic relationship between the old guard (Wall Street) and individual traders who are on the rise,\u201d he said.<\/p>\n

Venture capital investor Chamath Palihapitiya said in a tweet that he had bought $115 call options on GameStop on Tuesday morning after an exchange with Reddit founder Alexis Ohanian.<\/p>\n

GameStop gained 22% to $93.70 in morning trade, well below Monday\u2019s intraday high of $159.18, but extending its winning streak to a fourth straight session.<\/p>\n

According to analytical firm S3 Partners, short sellers in GameStop are down $5 billion on a mark-to-market, net-of-financing basis in 2021, which included $876 million of losses early Tuesday.<\/p>\n

\u201cGME shorts and longs are in a knockout battle being waged in the stock market as well as social media platforms,\u201d wrote Ihor Dusaniwsky, S3\u2019s managing director of predictive analytics.<\/p>\n

Another highflyer, Virgin Galactic Holdings, was up 19% on the day on Tuesday at about $43, and about 81% on the year to date.<\/p>\n

The broader U.S. stock market was about flat.<\/p>\n

A BAD END<\/h2>\n

Much of the action has centered around shares that have been heavily \u201cshorted\u201d by other market players – traditionally an area dominated by hedge funds.<\/p>\n

Shares in Evotec rallied 8% on Tuesday with three traders reporting that hedge fund Melvin Capital Management was closing its short positions after suffering losses on some bets.<\/p>\n

Melvin previously held a 6.2% short bet against Evotec, according to filings with the German regulator. The fund did not respond to requests for comment.<\/p>\n

Short sellers typically bet against stocks of companies that they view as outdated in their business models or otherwise overvalued. BlackBerry shares early Tuesday traded at a 12-month forward P\/E ratio of 117.22, while online retailer Etsy has a multiple of 93.44.<\/p>\n

By contrast, Apple Inc, the world\u2019s most valuable publicly listed firm, had a 12-month forward P\/E ratio of just 34.46 as of early Tuesday.<\/p>\n

Etsy leapt on Tuesday after Tesla Inc Chief Executive Officer Elon Musk, also often a focal point for social media-savvy traders, endorsed the company in a tweet.<\/p>\n

Finnish telecom network equipment maker Nokia was up about 24%, while headphones maker Koss Corp jumped 71% to its highest since April 2006, up nearly 200% this year.<\/p>\n

Investor Andrew Left is as convinced as ever that GameStop is a dying business and its stock price will fall sharply. Left shorted the company\u2019s stock when it traded around $40 a share and forecast publicly that it would tumble to $20 a share. He said on Tuesday that he was still short the stock.<\/p>\n

\u201cWill it end badly? Sure. We just don\u2019t know when,\u201d said Thomas Hayes, managing member at Great Hill Capital LLC in New York.<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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