Yesterday should have been a bad day for mall video game retailers Game stop (New York Stock Exchange: GME). In an article on Twitter, short seller Citron Research threatened to publish a live video listing “five reasons for GameStop” [buyers] It’s the fool of this poker game” and why GameStop stock will “return to $20 quickly.”
However, the video did not arrive as expected, and GameStop did not return at all. Instead, it was up 10%, and at noon Eastern Time, it was up 21% today.
Why is this so? Some believe that GameStop’s short sellers are suffering a brief squeeze-this may be true. However, it is true that Citron failed to deliver its real-time video as expected, and accused yesterday of “the people who delayed Citron Twitter”.
Too many people are attacking Citron Twitter, which will be recorded and published today. $ GME buys $ 20, at your own risk
— Citron Research (@CitronResearch) January 21, 2021
The video did not eventually come out, but there was no live broadcast. Andrew Left, the head of Xiangtron, listed five reasons for selling GameStop. These reasons are basically this:
- Although there is high short interest in GameStop stock, there is “no short squeeze situation” because there is still a large amount of GameStop stock available for borrowing and shorting.
- Hardware sales increased by 23% year-on-year in December, but GameStop’s sales fell by 9%, so its market share is decreasing Best Buy, Walmartwith Amazon.
- Next year, GameStop’s EBITDA price is 40 times its price, which is indeed very expensive.
- The Twitter mob is pushing the stock price up, leading to high valuations.
- GameStop’s debt exceeds $1 billion and may sell shares to reduce debt, thereby diluting anyone who buys GameStop.
How to do
I agree with most of these arguments-except for the argument that there is no brief squeeze. Anyone who shorts this stock and bets that it will fall may at least be a little disturbed to see it become more expensive.
As a reminder: When you short a stock, when the price drops to $0, you make 100% profit. When you short the stock but the price rises, your losses may be unlimited. In the end, Citron believed that GameStop was a “failed shopping mall retailer”, but it was GameStop’s short sellers who failed today.