GameStock Jumps More Than 20% In Odds Trading; AMC shares also pop

GameStock Jumps More Than 20% In Odds Trading;  AMC shares also pop

A screen shows the logo and trading information for GameStop on the floor of the New York Stock Exchange (NYSE) on March 29, 2022.

Brendan McDermid | Reuters

Shares of two meme stocks rose on Thursday, adding an unexpected crease to a stock market that has been in choppy trading for more than a month.

GameStop is up more than 20% and has been halted multiple times due to volatility. Theater chain AMC Entertainment’s stock rose 18%.

GameStop and AMC caused a stir early last year when a group of retail investors coordinated trades in online chat rooms to create massive short squeezes on these stocks, which are widely hated by hedge funds and other gamblers. The meteoric rallies caused great pain to many hedge funds and other short sellers involved in these speculative stocks.

Since then, stocks have retreated from their highs and short sellers have started building positions again. According to FactSet, AMC has a 19.5% short stake while GameStop is at 21.4%.

These big bets against the company can sometimes result in dramatic one-day moves in a stock, as hedge funds begin to close their short positions when a stock rises, creating more buying pressure. This process is known as a short squeeze.

Even with Thursday’s big moves, shares remain well below their highs from the first half of 2021. GameStop, which rose to as high as $483 per share on an intraday basis last January, was between 90 and 100 on Thursday Traded in US dollars per share.

AMC, which hit an intraday price of $72.62 last June, was trading at about $12 a share on Thursday.

With company market caps falling so much, it is easier for some trading houses or even a large fund to force a fresh short squeeze.

In 2021, both AMC and GameStop used their temporarily elevated stock prices to sell additional stock and raise capital. Adam Aron, CEO of AMC, has gone to great lengths to engage the retail investors who attended the rally, answer questions from small dollar traders on earnings calls and introduce shareholder perks in physical theaters.

AMC has used some of the money raised to buy out other theaters across the country. However, earlier this year the company also bought a stake in a small gold mining company that has a shaky financial history.

— CNBC’s Yun Li contributed to this report

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