Shares of gaming merchandise retailer GameStop reached record highs on Monday due to a crush on short-sellers. The company’s stocks skyrocketed by 130% with shares hitting a value of $100 by mid-session on Monday.
This unparalleled surge emerged as the result of a massive short squeeze on the stock, whereby those who bet against the stock decided to buy more shares in order to prevent larger impending losses. As a result of this action, GameStop’s stocks were pushed higher.
According to veteran trader Brian Shannon, short-sellers should avoid going against stocks such as GameStop’s when its value has escalated too much. “If you look at short interest numbers, they’re rotating extremely fast right now,” Shannon explained.
“It’s a game of musical chairs. If you’re involved in it, if you’re looking to short it, wait for it to break down. There’s no such thing as up too much.”
According to numerous reports, the driving force behind last week’s stock surge was a prediction by short-seller Citron Research that GameStop’s stocks would drop to $20 each. This prediction led to a clash between short-sellers and a Reddit sub-community called WallStreetBets.
