GameStop spiked 94% in short squeeze after Chewy co-founder added to board

A rush of short covering and day trading fueled a record stock surge for GameStop just days after the addition of activist investor and Chewy co-founder Ryan Cohen to the video game retailer’s board.

The Grapevine-based company spiked a record 94% Wednesday as retail investors flocked to the struggling company. The stock gained $11.47, or 58%, to close at $31.42 a share, a five-year high.

Traders betting on Cohen’s plans to transform the chain in the image of his highly successful Chewy helped fuel the now-three-day rally, with the stock shaking off years of underperformance.

GameStop shares have climbed as much as 118% in the three days since news of Cohen’s addition to the board and reached the highest price since November 2015.

Short interest in GameStop remains near recent highs, with 138% of shares available for trading currently sold short, data compiled by S3 Partners shows.

Cohen’s spot on the board, along with two other former Chewy colleagues, was well-received by Wall Street analysts, with Telsey’s Joseph Feldman saying in a Tuesday note that the trio will “make GameStop a more digitally focused retailer.”

“There is a GameStop short squeeze, but no, the squeeze is not the major force behind the price move,” Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, said by email. “This is much like the chicken-and-egg question — did long buying lead to short covering/squeeze or short covering/squeeze lead to long buying?”

Options volume surged for the retailer on Wednesday, with total call volume jumping to over four times its 20-day average, led by the January $40 calls.

Those contracts, set to expire Friday, traded at an average price of $2.57 with 59% changing hands on the mid or offer side. Total call volume was outpacing put volume by a rate of 2-to-1 by noon New York time on Wednesday.

Bailey Lipschultz and Gregory Calderone,

Bloomberg

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