GameStop announced its fiscal first quarter results on Wednesday along with a new Amazon CEO and CFO
This is the third time this year that investors have lost billions of dollars in just a few days. Anyone who bought GameStop shares and held them for the last 10 trading sessions is now under water, some of them for more than $ 100 a share.
It took one to three months to recover from the previous two sell-offs this year and the stock only spent a handful of trading sessions at a time at or near previous highs before the stock sold again. It may take another short squeeze for them to recover a third time.
Short compression analysis
S3 Partners’ Ihor Dusaniwsky tracks the short interest of stocks in real time, and posts several of his charts and analysis on Twitter. Dusaniwsky has developed a Short Squeeze score and rates GameStop at a 100 out of 100 for a short squeeze. This means that a stock has a high potential for a small contraction, depending on its next share price move. Note that his scale had previously been 1 to 10.
The number comes from an algorithm you created and is not subjective. Some of the factors are short sale liquidity, trade liquidity, financial liquidity, and market value gains and losses. He wrote in an email: “A value is considered ‘cluttered’ on the short side if one or all of the following occurs:”
- There is a large amount of dollars at risk on the short side (high short interest)
- There is a large proportion of the negotiable float of a shorted security (S3 SI% Float High)
- Stock loan supply shortage (high stock loan fees)
- There is a limited daily trading volume (high days to cover)
However, even when these criteria are met, it does not necessarily mean that the stock is a shortage candidate. Dusaniwsky added: “While a stock may be ‘crowded’, it may not necessarily be a shortage candidate. An additional variable, which is necessary for a brief contraction to occur, is substantial net financing losses at market price. ”
He continued: “A short position, however crowded it may be, that is still profitable cannot be squeezed out. No trader will be forced to abandon a position that is still profitable. Losses in market value are the main impetus for a Short Squeeze to occur. “
Big losses could lead to a short squeeze
Dusaniwsky estimates that there is still moderate short coverage at GameStop with short sellers covering 685,000 shares, worth $ 207 million, over the past 30 days. This is a 5.8% decline in stocks short, as the stock rose 111%.
Most of that short hedging came in the past week with 677,000 shares bought to hedge, worth $ 205 million. This is a 5.7% decline in stocks short, while the stock was up 7%.
Using Thursday’s stock price of $ 220.39:
- GME’s short interest is $ 3.4 billion vs. $ 2.99 billion on Monday
- And against a market capitalization of $ 17.6 billion
- 11.23 million shares are short
- 19.41% Short Floating Interest Percentage
- Shorts continue to lose $ 6.5 billion in market value losses to date
- Even after making $ 923 million with Thursday’s 27% drop
- Shorts are down $ 16 million or 0.5% in June
As described above, it’s the $ 6.5 billion in losses this year that could create a small squeeze on GameStop’s stock.