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They say those that don’t learn from history are doomed to repeat it, and short sellers who were hoping to profit off of the demise of GameStop learned that lesson the hard way thanks in no small part to the Reddit user who has managed to spark another meme stock buying frenzy.
It’s been more than three years since Keith Gill—the Reddit user also known as “RoaringKitty”—used posts on r/wallstreetbets and YouTube videos to highlight the potential upside of GameStop stock, which was viewed as a poor investment by the many institutional investors who took up a short position due to the perceived struggles of the video game retailer.
Things eventually came to a head in January of 2021 courtesy of the online movement that sparked a short squeeze thanks to the deluge of retail investors (a.k.a. “normal” people) who attempted to take on Wall Street by scooping up GameStop stock and causing its value to skyrocket approximately 3000% compared to the start of the surge.
The firms that had bet against GameStop ultimately lost around $20 billion thanks to what unfolded, and one of them (Melvin Capital) was eventually forced to shut down due to the hit it took due to what transpired.
The saga was eventually immortalized in the movie Dumb Money, which featured Paul Dano in the role of RoaringKitty—a man who’d largely flown under the radar before making waves yet again by posting his first tweet in close to three years on Sunday.
That single image was enough to spark another meme stock rally. GameStop stock had closed at $17.42 a share on Friday, but it spiked as high as $64.70 on Tuesday as we were treated to another buying frenzy thanks to Gill’s loyal legion of acolytes.
On Tuesday, S3 Partners managing director Ihor Dusaniwsky assessed the damage short sellers have suffered as a result, saying the latest surge cost people who were betting against GameStop around $2.2 billion thanks to what unfolded.
After being down -$862 million in mark-to-market losses yesterday, $GME shorts are down another -$1.36 billion in mark-to-market losses today. Short interest is $1.92 billion, 63.2 million shares shorted, 23.68% SI % Float. We are seeing continued squeeze related short covering…
— Ihor Dusaniwsky🇺🇦 (@ihors3) May 14, 2024
AMC stock also got a similar treatment courtesy of bulls who caused it to go from $2.95 at the end of Friday to $11.90 on Tuesday, which cost short sellers on that particular front approximately $321 million.
You hate to see it.