GameStop, AMC extend rallies; short-sellers in GameStop down by US$6.7b

Shares in GameStop and cinema operator AMC Entertainment rallied to their highest levels in months on Wednesday, with some market-watchers saying the recent surge was forcing bearish investors to unwind their bets against the video game retailer, Reuters reports.

GameStop shares surged by 15.8 percent, at US$242.56, around its highest level since mid-March, while AMC shares shot up by 19.2 percent, at US$19.56, the highest since January 27. CFRA on Wednesday raised its price target for AMC shares to US$18 from US$2.50.

Shares of GameStop and other companies popular on forums such as Reddit’s WallStreetBets have been climbing in recent weeks and the rally accelerated on Tuesday.

GameStop is now 70 percent above its closing low for May, while AMC has risen 95 percent in the month-to-date.

GameStop’s big gains have caused some bearish investors to retreat, forced to buy shares to cover their short-sale loans, said Ihor Dusaniwsky, managing director of predictive analytics at S3.

“We have started to see some short covering in GME as mark-to-market losses mount on the short side,” Dusaniwsky said in an email on Wednesday.

Around 958,000 shares of GameStop, worth US$201 million, were bought to cover short sales over the last week, S3 data showed. Roughly 11.55 million shares of GameStop, or 20.3 percent of its float, are currently sold short, Dusaniwsky said.

Short-sellers in GameStop are down US$6.7 billion in year-to-date mark-to-market losses, including US$339 million from Tuesday’s more than 16 percent gain and about US$383 million due to Wednesday’s move, S3 data showed.

A short squeeze helped send GameStop shares increase by more than 1,600 percent in January to a record high of US$483.

The stock pared most of those gains in the following month, only to bounce again in March.

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