US Retail Investors Fight Against Short Selling... Stock Price Rises 8 Times

Surge in Small and Mid-Cap Stocks as Ant Investors Flock
Massive Losses for Short Sellers
Concerns Over 'Dotcom Bubble' Reappearance

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] In the U.S. stock market, the phenomenon of sharp fluctuations in small and mid-cap stocks is fueling concerns about market overheating.

On the 26th (local time), the standout stock on the New York Stock Exchange was GameStop, a game distribution company. The company closed its first trade of the year at $17.25 and surged to $159 during the day. GameStop's stock price broke the $40 mark since the 13th and entered the $70 range in the last trade of last week, then doubled intraday on this day, showing a rare phenomenon. Based on the intraday high, GameStop's stock price has increased more than eightfold this year. GameStop closed the day at $76, up 18% from the previous day.

The sharp rise in this stock price has sparked controversy over market overvaluation. On this day, U.S. securities-related media outlets focused intensively on the fluctuations of GameStop's stock price.

What draws attention is that this company's stock has the highest short selling volume among U.S.-listed stocks. After news broke that activist investors joined the company's board, the stock price surged, attracting day trading purchases from individual investors. Those who had shorted the stock engaged in short covering, further driving up the price. Bloomberg reported that the investment losses of the GameStop short sellers have reached $6 billion.

On the same day in the New York Stock Exchange, the stocks of smartphone maker BlackBerry, theater chain AMC, and retailer Bed Bath & Beyond also surged, drawing attention. These stocks showed intraday gains close to 40%. BlackBerry announced a settlement of a royalty dispute with Facebook, but this was not considered a reason for such a price increase. The companies involved also explained that there was no reason for the stock price surge.

Bloomberg reported that users of the U.S. online community 'Reddit' drove up the stock prices of these companies. According to the report, stocks with a market capitalization under $50 million accounted for more than 10% of the trading volume that morning.

Experts interpret the soaring stock prices of companies with poor earnings as a sign of market overheating.

Julian Emanuel, Chief Equity and Derivatives Strategist at BTIG, expressed concern, saying, "The expansion of option buying and the emergence of stocks soaring without fundamentals is similar to the dot-com bubble period in 2000."

He added, "There are no signs yet to worry about a market decline, but the recent volatility suggests that a 10-15% correction could happen at any time."

Meanwhile, on the same day in the New York Stock Exchange, the Dow Jones Industrial Average fell 0.12%, but the S&P 500 and Nasdaq indices closed up 0.36% and 0.69%, respectively. Apple, which is about to announce earnings, led the market with a 2.77% rise.