Written by Norman Isaac Mwambazi

GameStop surges 27% as other meme stocks rise on a relatively slow trading day

It has been a quiet few weeks for videogame retailer GameStop Corporation (ticker: GME) ever since the company released its …

It has been a quiet few weeks for videogame retailer GameStop Corporation (ticker: GME) ever since the company released its better-than-expected earnings report for the second quarter of the 2021 fiscal year last month. The company has not released any statement or files anything with the Securities and Exchange Commission (SEC) in over a month for investors to bank on but this did not stop retail investors and short sellers to trade the stock.

The company, which is still categorised as a meme stock, is back in business news, after surging more than 27% yesterday, Tuesday, August 24, 2021, as retail investors came back in big numbers to trade in the stock on a generally quiet stock market.

Due to the surge, GameStop is currently trading at $210.29 a share after a heavy trading volume of more than 14 million shares. According to market data from FactSet, this is seven times more than the company’s 30-day average, and it is the biggest one-day gain since it soared 52.7% five months ago.

This is the first time that GameStop stock is posting a double-digit growth since its 10.20% rise on July 20, and it’s the first time it has gained more than 20% since March.

Other meme stocks also followed into GameStop’s footsteps by recording significant gains yesterday. American theatre operator AMC Entertainment (ticker: AMC) stock jumped 20.3% and according to stock brokerage firm Fidelity, it was the most actively traded stock on its platform.

Other stocks that registered gains yesterday include healthcare tech company Clover Health Investments Corp (ticker: CLOV), which is nearly 10% and domestic merchandise chain retail stores operator Bed Bath & Beyond (ticker: BBBY) gained more than 4% in the same period.

It is hard to talk about meme stocks and ignore stock brokerage platform Robinhood (ticker: HOOD). Robinhood, which offers a free trading platform and has been at the centre of meme stock trading activity all year, also earned a meme stock status when it became highly volatile after going public last month. In yesterday’s trading session, Robinhood stock jumped 9% without releasing any news or SEC filing that might have prompted this kind of move on the stock market. Robinhood’s shares are now currently trading at $49.38 a share, which is 41.82% higher than its IPO price.

How Meme stocks rallied in yesterday’s trading session

GMEGameStop Corp45.40210.2927.53
AMCAMC Entertainment Holdings Inc7.4844.2620.34
BBBYBed Bath & Beyond Inc1.2328.614.49
CLOVClover Health Investments Corp0.808.929.85
Source: FactSet

Although shorting these stocks is basically what prompted retail traders on Reddit to gang up on these meme stocks to upset institutional investors, some of these stocks are still being sold short, although there has been a decline. According to market data by S3 Partners, a reporting, data and analytics provider, about 28% of AMC’s float shares are sold short.

To put this into context, a typical U.S. stock usually has an average of 5% short interest. The data also shows that GameStop is in a better position now than it was in January, as its short interest has dropped significantly to about 10% from more than 100% in January 2021.

Meme stocks aside, the broad stock market was rather dull and no significant moves were registered by big stock market players as institutional investors and hedge funds await the outcome of the Federal Reserve Bank summit that kicks off tomorrow, Thursday, August 26, 2021, and will run through Friday. Investors and analysts expect the market to register some moves if the Fed releases any market-moving news.

The benchmark S&P 500 closed yesterday’s trading session only 0.2% higher than the previous day’s close, with the SPDR S&P 500 ETF trading only 30 million shares. According to FactSet data, this is about half of its 30-day average.

As the economy open more and continue its road to recovery, the Fed mentioned that it had has started discussions to pull back its minimum $120 billion a month bond-buying program by the end of this year among discussing other measures like interest rates. During the summit, central banks are also expected to communicate their plans for tapering monetary stimulus.