Shares of video game retailer GameStop Corporation (NYSE: GME) rallied on Monday with retail traders excited by the return to social media by Keith Gill, aka Roaring Kitty, a central character in the previous rally of shares in 2021.
Investors betting against GameStop by shorting the stock are now being punished thanks to the rally.
What Happened: One of the key items that helped boost the share price of GameStop in 2021 was a short squeeze rally and the headline of short interest in GameStop being greater than 100%.
High short interest sparked a rush of traders into the stock, setting up a David vs. Goliath showdown as retail traders took on hedge funds that were betting against the video game retailer.
It could be déjà vu all over again, with GameStop showing high short interest of over 24% according to data from S3 Partners.
Short sellers are now losing big in the month of May, according to data from S3 Partners.
"We have seen 1.4 million new shares shorted, worth $24 million over the last 30 days. Shorts were up +$392 million in Jan-April mark-to-market profits. But today's +92% price move has slapped shorts with -$1.03 billion in mark-to-market losses," S3 Managing Director Predictive Analytics Ihor Dusaniwsky tweeted Monday.
Dusaniwsky said that shorts are now down $1.43 billion, counting the May month-to-date numbers.
Why It's Important: The rally in GameStop shares has led to increased attention paid to the "meme stocks" class of 2021, which were stocks that often moved in correlation to GameStop.
Typically, the meme stocks were stocks with high short interest and names that could see a short squeeze with enough action from traders.
AMC Entertainment Holdings (NYSE: AMC) was a meme stock in 2021 and is seeing increased interest and a soaring price in correlation with GameStop once again in 2024.
Dusaniwsky said that AMC short interest is 19.0% of the float.
"We have seen 6.2 million new shares shorted, worth $18 million over the last 30 days," Dusaniwsky said.
On Monday, AMC short sellers had $39 million in mark-to-market losses, according to Dusaniwsky. With the May month-to-date figures, short sellers are up $63.9 million on their AMC trade.
While AMC short sellers are currently profitable, the continued price increase in shares on Monday and Tuesday could see the paper profits shift to paper losses for short sellers year-to-date.
GME Price Action: GameStop shares are up 63% to $49.88 on Tuesday. Shares have traded between $9.95 and $64.83 over the last 52 weeks, and hit around $80 per share in the pre-market trading session Monday.