The King of Short Squeeze Names is Starting to Lose Steam
Even as GME announces a massive haul on its latest offering, it likely won’t be enough to support the stock’s current levels.
The run that market’s two biggest “meme stocks” – namely GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC) – have been on this year is nothing short of incredible.
GameStop stock has surged 1,714% since the first trading day of the year.
AMC shares have risen by as much as 3,200% in 2021.
Both of those numbers are unbelievable gains for stocks in such a short timeframe. And they’ve made a fortune for the retail investors that targeted the short positions on them.
But even as traders that jumped into these stocks this year are currently rolling in the money, we’ve seen another trend developing regarding short squeeze stocks…
One that’s creating billions of dollars for its beneficiaries.
Where’s the money?
Yesterday, GameStop announced that it had raised an additional $1.1 billion in capital from the sale of 5 million new shares of its stock.
That – in combination with a previous at the market offering in April that raised $551 million – brings GameStop’s cash on hand to over $2 billion.
The move was just the latest in a rash of new stock offerings this year from companies that have seen their share prices increase exponentially due to coordinated buying from retail investors.
Familiar short squeeze names like AMC, Torchlight Energy Resources, Inc. (TRCH), Castor Maritime Inc. (CTRM), and Express, Inc. (EXPR) have generated billions of dollars of capital over the last several weeks by selling additional shares at their currently inflated prices.
After the results of the latest stock offering were announced, GME shares rose by as much as 25% on Tuesday.
GME shareholders are hoping that the fresh capital will continue to drive share higher as the video game retail now has all the ammo it likely needs to continue revamping its business to focus more on e-commerce while strengthening its balance sheet.
But I would offer a word of caution. Here’s why…
How do I get some?
I think that GME and AMC have done the right thing by raising capital as their stocks have moved higher in price.
From a business standpoint, using the massive spike in their stock price that retail investors have created this year to generate an extraordinary amount of cash was an incredibly savvy move.
Going forward, I think there will be more companies who raise capital when their stock makes big moves up – whether it’s due to a short squeeze or other catalysts.
But, as for the hope that the fresh capital will help give another boost to the short squeeze attempt on GME, I wouldn’t hold my breath.
Yes, the cash is great for the business, but now they have to do something with it. And right now, the stock is already so far valued over any fundamentals that those efforts wouldn’t have any bearing on the share price.
The short interest in both GME and AMC has dropped to nearly negligible levels. AMC’s float is around 14% short, while GME’s is around 20% – neither of which is significant enough to force a short squeeze.
As such, it appears that the short squeeze efforts could be running out of steam. Jumping into them now would likely be a recipe for disaster.
I see GME and AMC headed much lower from here.
But those aren’t the only assets about to take a dive after a huge run up. And my colleague Mark Sebastian is going to show you how to profit from it, for free.
Take a look…
A Dirt-Cheap Trade to Short the Dollar
Last week was stocks’ worst in nearly four months – and fear sent the dollar rallying higher.
But volatility expert Mark Sebastian says it’s time to fade that move.
And on Thursday, June 24 at 12:00 p.m. he’s dropping a dirt cheap trade – I’m talking less than $0.50 – to do just that.
But it’s exclusively for his Profit Takeover members. Luckily, it’s free to sign up – and you can join right here.
In the Spotlight: More reason to be bearish on Bitcoin
While the Chinese crackdown on cryptocurrencies is mostly to blame for coins like Bitcoin dropping in recent days, there could be another underlying reason that’s adding pressure to the digital market.
As Bitcoin prices fell below $30,000 this week, voices began to emerge that placed some of the blame at the feet of the Federal Reserve.
Much like we saw in the stock market over the last year, a large number of cryptocurrencies have been given rocket fuel from the Fed’s stimulus and dovish posture.
But now that the Fed has signaled its intention to raise interest rates again in the coming years, both the stock and digital markets are starting to cool off.
In the end, I believe we will see continued growth for cryptocurrencies. The current drop we’re experiencing is going to provide us with a great opportunity to buy in at big discounts.
Keep an eye out for future Profit Pregame alerts, as I’ll be sure to let you know when I see the crypto market find a floor.