The stock of GameStop (GME) increased by almost 60% on Tuesday. This continues a rally driven by internet memes, which caused the shares of the video game retailer to go up by 74% in the previous session.
GameStop’s increase in stock price was also accompanied by a significant increase in AMC (AMC) stock. The stock price of the company that operates theatres increased by approximately 30% after reaching a peak of 120% earlier on Tuesday.
AMC recently filed a report with the SEC stating that it sold around 72.5 million new shares in the previous trading session. This allowed the company to raise approximately $250 million.
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On Tuesday, some stocks that were heavily bet against by investors saw significant increases in their prices. SunPower (SPWR) went up by 63%, Beyond Meat (BYND) increased by 25%, and the Children’s Place (PLCE) saw a rise of around 6%.
GameStop’s stock increased by up to 110% in the previous trading session. This happened because Keith Gill, also known as “Roaring Kitty,” who previously made a positive argument for GameStop, resurfaced. His argument had sparked the meme stock rally in 2021.
The stock had not changed much in value since the beginning of the year, but it had increased by about 60% in the last month. The value of GameStop stock has increased by more than 180% in the past month, excluding the gains made on Tuesday.
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In a message to clients, Nicholas Colas, who co-founded DataTrek Research, said that the recent trading activity reminds him of what happened earlier in 2021. During that time, a similar situation caused a sharp increase in the price of GameStop due to a short squeeze.
Colas observed that the increase in 2021 was much bigger than the current one. In January 2021, GameStop stock rose by 1,500% before losing most of those gains.
Despite the pain experienced by short sellers during the original meme stock rally three years ago, it hasn’t stopped them from continuing to bet against these companies.
According to data from S3 Partners, the amount of people betting against GameStop’s stock has stayed high since the meme rally. Almost 24% of the available shares are being shorted.
On Tuesday, the value of GameStop shorts decreased by $1.36 billion, following a loss of nearly $900 million on Monday.
“According to Ihor Dusaniwsky, managing director of S3 Partners, we are witnessing ongoing short covering as a result of the resurgence of the meme trade.”
According to Colas, if a trader is betting against a stock that is rapidly increasing in value, they have no other option but to sell their position no matter what the price is.
“According to Colas, in the case of GME, you are also worried that regular traders might be tempted to repeat what happened in 2021,” Colas added.
Three years ago, there was a lot of excitement around memes, which caught the attention of people across the country. This led to many retail traders joining in, especially during the pandemic lockdowns.
“I have a completely different perspective on this now compared to 2021. It was a significant moment that brought back tens of millions of people into the marketplace,” said Tom Sosnoff, CEO of tastylive, a platform for trading options and futures.
However, YouTuber Matt Kohrs, who has previously invested in GameStop and AMC, believes that the important factor of “small investors versus large investors” during the short squeezes of 2021 still applies to the current rally.
“Many people believe that the entire system is designed to benefit the powerful elite and protect them from any consequences.” “GME is the symbol of the populist movement against that concept,” said Kohrs. “The only real change I see from a psychological perspective is no longer being confined indoors,” he added.
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