Proactive Investors -
- FTSE 100 up 29 points at 8444
- UK unemployment rises, with high wage growth that could worry Bank of England
- Ofgem consults on removing ban on switching deals
GameStop keeps rising, meaning losses for shorts
Just ahead of the US opening bell, GameStop is now up over 120%.
Short sellers of the stock are set to lose $1.2 billion today, according to data from Ortex, with the stock surge today adding up to around $2.5 billion of losses for short-sellers so far this month.
The US games retailer was the second most bought stock on the UK investment platform Interactive Investor (ii) yesterday and earlier, Saxo said they had seen a tenfold increase in GameStop trading.
The stock is up 126% in premarket trading today at the time of writing, while other memes from 2021 are also rising, AMC surging 110% and Blackberry (TSX:TSX:BB) ringing in with a 25% premarket gain.
The market is beyond satire, you can’t make it up pic.twitter.com/a4TIWXCfEL— litquidity (@litcapital) May 14, 2024
Myron Jobson, senior personal finance analyst at ii, says: “The surprise return of a social media account that helped fuel the meteoric rise in GameStop’s share price back in 2021 has breathed new life into the meme stock, which had broadly been following a downward trend since its peak.
"The surge has nothing to do with a turnaround in the company’s fortunes and everything to do with the renaissance of the FOMO (fear of missing out) sentiment that saw the stock price of the video game retailer inexplicably spike, despite the company’s fundamentals painting a bleak picture.
He says Mark Twain’s famous maxim, ‘History doesn't repeat itself but it often rhymes,’ is worth remembering.
"Time will tell whether the latest uptick in GameStop’s stock price becomes the latest in a string of flash-in-the-pan moments the firm has experienced over the years," Jobson adds.
"One of the key takeaways from the meme stock saga is the importance of understanding investment risk. Risk is an inherent part of investing, but there are some investments that raise the stakes to levels akin to slot machines in a casino.
"Treating investing like a spin at a roulette wheel by betting on highly speculative stocks is not a sustainable strategy to build wealth over the long term. The reality is that the odds are heavily stacked against those who attempt to time the market."
"Some investors can afford to speculate on the stock, knowing full well that there is a substantial risk of losing money. But betting it all in hope of substantial gains is not a wise investment strategy."
FTSE on the rise amid short-squeeze?
Is the FTSE 100 getting some of mojo working again from recent weeks? The London index is up almost 30 points to over 8444, which if held would see another record closing high.
Top of the blue-chip leaderboard is Ocado Group PLC (LON:OCDO) up 9.4%, the second most shorted stock in the FTSE - is there a connection to the GameStop and meme stock rally in the states?
Similarly, BT (LON:BT) also a focus of short-sellers as mentioned earlier, is also in the top 10 risers, up 2.2%.
We have a few retailers among this bunch too, Burberry Group (LON:BRBY) up 3.7% ahead of results tomorrow, along with Frasers Group (LON:FRAS) up 2%, B&Q owner Kingfisher (LON:KGF) up 1.4% and Primark owner AB Foods (LON:ABF) up 1.3%.
Meme stock chat
Commenting on a meme stocks resurgence, the Saxo online trading platform is reporting a tenfold increase in GameStop trading.
Mike Owens, senior sales trader at Saxo UK, says: “With modern online investment tools, traders will always be on the lookout for price momentum and to take adVantage of short term market moves."
Saxo saw the big increase in client activity in Gamestop after the latest ‘meme’ interest over the weekend, he says.
He says the ‘social media, retail trading community’ tend to like the sort of derivative products such as options and CFDs on stocks like GameStop.
"Buying call options on these companies allows traders to define the cost of their trade while also potentially generating large gains in the event of a sharp upward price move," he explains.
David Morrison at Trade Nation adds that GameStop started to rally earlier this month before it jumped on Friday to hit a 10-month high above $20.
"It’s always a laugh to see moves like this, but there’s a serious side too. Such volatility can wipe out investors as quickly as it makes them fortunes.
"Could this reemergence of meme stock madness signal that reasoned judgement has once again been chucked out of the window, and equity traders are back in casino mode? Hopefully not."
No memes in London, but defence companies get a rocket
The FTSE 100 is back, tentatively, on the front, up 14 points as Wall Street starts to wake up.
While London does not have meme stocks that I am aware of, there is a mix of retailers and defence companies in the leaderboard at lunchtime.
Currys (LON:CURY) and Ocado are top risers, up roughly 9% and 6% respectively.
Defence company Babcock (LON:BAB) International PLC (LSE:BAB) is up 4% after being awarded an order to build six new landing and assault craft for the Royal Marines, along with BAE Systems (LON:BAES) PLC (LSE:BA.).
Grant Shapps, defence minister, said the new vessels would be 'multi-role support ships' capable of launching drones and laser-targeted missiles as well as amphibious landing support.
PM Rishi Sunak announced last month that UK defence spending would rise to 2.5% of GDP by 2030, adding that the country's weapons makers must be on a "war footing".
US set for flat start (apart from meme stocks)
US stocks are set for a hesitant open, continuing the market style we have seen on both sides of the pond this week.
In futures markets, the Dow Jones is up 0.06%, the S&P 500 0.04% and Nasdaq 100 just 0.03%.
Yesterday saw the US stock indices mostly traded near the flat line before the Dow and S&P closed in negative territory, while the Nasdaq Composite rose 0.3%.
For the Dow this ended a nine-day winning run.
Now, a separate market report might be needed for the latest moves in US meme stocks.
GameStop Corp (NYSE:GME), the memeist of them all, climbed to almost a year's high on Friday and enjoyed a 70%-plus jump yesterday to $30.45, with a further pre-market move this morning, with a rocket-emoji 119% surge to $66.58.
The Redditor known as Roaring Kitty, who was one of the main triggers for the interest in GameStop back in the memestock heyday of early 2021, has again triggered interest with a social media return.
Today, AMC Entertainment Holdings (NYSE:AMC), which rose 78% on Monday to $5.19, has zoomed up 120% pre-market to $11.44.
Market analyst Neil Wilson at Finalto says: “We can assume a fair chunk of the move is short-covering action chasing the initial move up.
“Some hedgies will have had calls on their shorts,” he adds.
GAMESTOP SHORT SELLERS SET TO LOSE $1.2 BLN ON TUESDAY AT $48.75 PREMARKET, ORTEX SAYSWITH TUESDAY'S STOCK SURGE, GAMESTOP SHORT SELLERS SET TO LOSE $2.5 BLN SO FAR THIS MONTH, ORTEX SAYS
— RedboxGlobal (@RedboxWire) May 14, 2024