18th of May 2021
It’s a script worthy of any blockbuster sequel. Following the David versus Goliath story of GameStop from earlier this year, retail investors are once again setting their sights on heavily shorted stocks and the hedge funds that hold those positions.
In January of this year, the world was enthralled by the GameStop saga as retail investors drove the value of GME upwards by more than 700 per cent in a single week, leading to a short squeeze – a phenomenon where short sellers are caught out by a sudden increase in the share price and have to buy back shares to cover their positions.
At the time, AMC was only a supporting act, but it is now back with a vengeance and has a leading role of its own.
The value of AMC stock rose almost 20 per cent yesterday, closing at $15.49 a share, its highest closing price since February 1st. ORTEX data shows that, as a result of these price increases, short sellers are down $503m on AMC positions over the past five trading days, with $210m of these losses coming in yesterday’s session.
However, this is still some way away from the scale of losses seen on GameStop short positions which, according to ORTEX data, now amount to almost $12bn year to date, with $426m of these losses coming in the past five trading days.
The prospect of the short squeeze on both stocks was highlighted by Ortex Analytics’ proprietary trading signals, helping our users to ensure they were correctly positioned ahead of yesterday’s events.
Commenting on the GameStop story earlier this year, we described the battle as signalling a fundamental shift in the balance of power driven by improved transparency and access to information. This week’s events show that we’re only at the very beginning of this story and as the quality of data available to retail investors improves, the playing field will continue to level.
But just like in any good story, there are likely to be twists and turns along the way, and a fightback from the short sellers is to be expected. Our data is already showing a decrease in short positions over recent days, but this is starting from an already very high exposure. As of today, 21.8% of GME’s freefloat and 18.3% of AMC’s freefloat are held in short positions, indicating there is still plenty of room for retail investors to hurt the short sellers. This sequel could well turn out to be a blockbuster in its own rights.
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