GameStop Short Squeeze
Posted By Eloise Posted On Comment (2)

Is The GameStop Short Squeeze Over?

GameStop shares fell over 30% on the Monday trading session as investors begin to realize the short squeeze is likely over, amidst the backdrop of multiple brokerage houses limiting the buying of the security.

To make matters worse for retail investors long GameStop, according to IHS the short interest has fallen from a high of 139% to a low of 39%.

Not only is GameStop down a massive amount from it’s Friday highs, but other heavily shorted stocks continue to fall.

  • Express, Inc down 17%
  • Naked Brand Group down 11%
  • Koss Corporation down 42%

GameStop is still up over 1,500%, currently at $238 per share, making the trade particularly dangerous for retail investors who think the squeeze has yet to come. But if the short squeeze has already happened, retail speculators should take heed as valuation metrics are particularly lofty:

  • Market Cap: $22 billion
  • Enterprise Value: $23 billion
  • Revenues: $5 billion
  • EBITDA: Negative $129 million
  • Price/Book: 63x
  • Price/Sales: 4.10x

In addition to the massively decreased “short interest” Reddit traders have turned their focus on silver, calling it one of the greatest short opportunities of a lifetime. Any incremental inflow into silver is likely a lack of outflow out of GameStop, making the $GME a dangerous double edge sword.

Source: WSB

For anyone still holding GameStop, a short squeeze can only happen as long as there is a massive amount of the free floating stock shorted. If the data from IHS is correct, GameStop could drop closer to it’s fair value of $10-15 per share.

In addition, GameStop’s put to call ratio is 2.7. This means put volume is about 2.7 times call volume, meaning the market is more interested in trading calls than calls. While this could mean many things, a put to call above 1 is usually a bearish indicator for a stock.

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