GameStop Corp. (NYSE:GME).
Targeting GameStop worked well for the Reddit community because GameStop had very high short interest over 130% at the time and has a relatively small float of 51 million. However, the short squeeze was big trouble for Melvin Capital, which was forced to close out its entire GameStop short position for a loss. Afterward Melvin Capital required Citadel and Point72 to inject $3 billion into its fund to bolster its finances.
The retail trading community is targeting stocks with the highest percentage of short interest to force institutions to cover their positions, which helps drive the share price dramatically higher. Small retail investors, large hedge funds and financial institutions may be wondering what stock they’ll successfully target next.
The angry online mob that hopes to watch hedge funds endure a long and painful financial death could end up rattling everyday investors along the way.
If the movement gains more steam, it has a shot at impacting some names you might never imagine, maybe even a stock like Detroit-based Rocket, should traders move on from GameStop and other names to new heavily shorted stocks.
Speculators will be trying to guess what the next GameStop or AMC Entertainment might be, according to Sam G. Huszczo, a chartered financial analyst in Southfield.
“What company could these crowd-sourced day traders target next?” he asked.
Author Bio
Matt is a Certified Financial Planner based in South Carolina who has been writing for The Motley Fool since 2012. Matt specializes in writing about bank stocks, REITs, and personal finance, but he loves any investment at the right price. Follow him on Twitter to keep up with his latest work!
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What happened
GameStop and
AMC Entertainment Holdings were sharply higher on Friday.
However, some of the mall operators that were also caught in the short-squeeze action are not. Mall real estate investment trusts, or REITs,
Seritage Growth Properties (NYSE:SRG),
Pennsylvania Real Estate Investment Trust (NYSE:PEI) were lower after spiking earlier in the week. At approximately 2:30 p.m. EST, the three mall REITs were down by 17%, 13%, and 10%, respectively.