‘American ants’ defeated short selling forces…’GameStop’ shares surged 345% this year

Enter 2021.01.27 16:31 | Revision 2021.01.27 16:46

In the U.S. stock market, there is a’weird phenomenon’ in which ants beat the short selling forces. This is the story of an American video game retailer called’GameStop’.

According to CNN on the 26th (local time), the stock price of GameStop companies soared to 147.98 dollars, up 92.71% compared to the day before during the intraday. This year alone, it has increased by almost 345%. The company’s stock was around $6 in October of last year.

The driving force of the soaring was American ants. Share prices soared as users of Reddit, the largest online community in the United States, continue to buy GameStop shares.

The stock price started to skyrocket on the 11th, when news came out on the 11th that the co-founder Leon Cohen of’Cui’, called the Amazon of the companion animal world, joined as the Board of Directors of GameStop. Individual investors flocked to the expectation that if the founder of Cohen joined, GameStop would increase the proportion of its online business and improve its performance. As investors flocked, prices soared like snowballs.

Tesla’s CEO Elon Musk posted a photo of which GameStop’s stock price was over $200 for a while and tweeted “Gamestonk!!” in a playful way.

Institutions saw the surge in stock prices as a bubble and started selling shortly, but they got stuck. It is known that the stocks short-sold by hedge funds such as Melvin Capital are about 140% of the circulation of GameStop.

It was thanks to’short selling’ that they were able to sell more than the amount in circulation. Short selling is the act of placing a sell order by’borrowing stock’ while you do not have stock.If you decide to sell it at a high price and later when the stock price falls, you can buy and fill stock at a cheaper price to get a margin of’as much as the price falls It is an investment technique.

The problem is when the stock price rises. They sold them cheaply, but they had to buy them and fill them up.

As GameStop stock prices soared, short selling forces were concentrated in the corner. The maturity date is approaching, when the stocks that have been borrowed and sold are nearing maturity, but the price continues to rise and the losses are growing exponentially. According to financial analyst S3 Partners, the short selling force has been losing more than $5 billion at GameStop this year.

Institutional investors have tried to sell additional shorts for the past 7 days to resist prices after a sharp rise in prices after short selling. It was trying to lower the price by increasing the selling tax. However, despite the additional short sale, prices rose, and individual investors who were angry with the institutional sale were bullied on the Internet, and the institution was crowded in the corner.

In fact, Citron founder Andrew Left mentioned earlier this month that GameStop was a “failed company,” and that “the stock price will fall,” but declared that it was abandoning the sale of GameStop due to Internet attacks such as Twitter hacking by angry individual investors.

The remaining option for institutional investors is’rollover’, which delays the date of repayment of borrowed shares. It means that I will hold on a little more until the price drops. However, the rollover interest cost is also around 80%, so this option is also burdensome.

Waiting doesn’t mean that the situation will improve. This is because there is no time for the ants to stop buying. It is an analysis that even if there is an additional sale by the institution, the investment price of individual investors will catch up with the purchase price and will recover soon.

CNN assessed the incident as “showing how risky it is for investors to bet on stocks with many followers.”