Why Is GameStop (GME) Stock Rocketing Higher Today

What Happened?

Shares of video game retailer GameStop (NYSE:GME) jumped 7.8% in the afternoon session after stocks tied to digital assets surged as Bitcoin, the world's largest cryptocurrency by market cap, reached a new all-time high, edging past the $110,000 mark. 

This rally also reflects growing investor confidence in Bitcoin's role as a potential store of value during a period of heightened market uncertainty. Geopolitical tensions, escalating trade disputes, and ongoing concerns about U.S. debt sustainability have prompted a flight to alternative assets, with digital currencies emerging as a perceived hedge against some of these risks.

After the initial pop the shares cooled down and closed the day at $30.91, up 10.2% from previous close.

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What The Market Is Telling Us

GameStop’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 12 months ago when the stock gained 104% on the news that retail trader Keith Gill (also known as Roaring Kitty) disclosed a stake in the company valued at around $115.7m. 

According to the screenshot posted on Reddit, Keith Gill bought 5 million GameStop shares at $21.27 and 120,000 call options worth $65.7 million with an exercise price of $20, set to expire on June 21, 2024. The update suggests a return of meme stock trading (includes taking long positions in heavily shorted stocks), fueled mostly by retail investors. 

As a reminder, Keith Gill played a significant role in the last meme stock trading frenzy in January 2021. By taking long positions in stocks that have been heavily shorted, market participants can trigger a short squeeze, causing a stock price to go up. This happens as short positions are closed to limit losses, as the collective buying pressure of market participants causes the stock price to move against those with a short position.

GameStop is up 1.8% since the beginning of the year, but at $31.20 per share, it is still trading 33% below its 52-week high of $46.55 from June 2024. Investors who bought $1,000 worth of GameStop’s shares 5 years ago would now be looking at an investment worth $29,856.

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