Short Sellers Still Love to Hate GameStop

Despite all the market turmoil, the video game retailer remains the most heavily shorted stock in the market.

Patrick T. Fallon/Bloomberg

Patrick T. Fallon/Bloomberg

Short sellers haven’t given up on video game retailer GameStop, the stock that roiled markets and almost took down hedge fund Melvin Capital last month.

Even though short sellers have covered more than $2.2 billion worth of GameStop shares over the past 30 days, the stock is still the most heavily shorted in the market, as measured by the percentage of its float that had been shorted as of Feb. 9, according to S3 Partners, which tracks short sales.

During the prior seven days, short sellers had tiptoed back into the stock, adding $110.5 million worth of GameStop shorts, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Some 50.75 percent of the float of GameStop shares are now short, according to the new analysis prepared by Dusaniwsky for Institutional Investor. The analysis looked at stocks with market capitalizations of more than $100 million using data as of Feb. 9.

At one point, around 140 percent of GameStop shares were short, leading to the conditions for the short squeeze that occurred after a group of investors on the Reddit forum WallStreetBets started bidding up the stock, triggering other buying and eventually forcing short sellers to cover.

The Reddit users focused on shorts held by Melvin Capital, which had disclosed short positions in its quarterly filings with the Securities and Exchange Commission. Melvin, which received a bailout of $2.75 billion from Citadel and Point72 as its losses mounted, said it had closed its GameStop short by Jan. 27.

[II Deep Dive: Buried in Reddit, the Seeds of Melvin Capital’s Crisis]

GameStop shares peaked the next day, trading as high as $483 per share before tumbling to around $50 on Friday afternoon. The stock is still up by more than 160 percent for the year.

The short interest in GameStop now totals $1.3 billion.

Despite heavy losses faced by short sellers this year in GameStop and other stocks, the shorts have not gone away. In fact, Dusaniwsky said overall short interest has increased so far in February to $1.11 trillion, up from $1.05 trillion at the end of January.

“But there has been short covering in the market, with some sectors getting squeezed by significant price appreciation of its constituents,” he told II in an email.

In February alone, short sellers have lost $61.4 billion in net-of-financing mark-to-market losses, he said.

Other popular shorts that continue to have high short interest as a percentage of the float include GSX Techedu, the online Chinese education company targeted by several activist short sellers last year, including Muddy Waters and Citron Research. GSX was Melvin Capital’s biggest disclosed short.

The short interest in GSX is much larger than that of GameStop, at $4.36 billion. About 33 percent of GSX’s float is short, making it the sixth most-shorted stock by S3 Partners’ calculations.

Short sellers covered more than $1 billion of GSX over the past month, including the $105 million of GSX shorts they added during the past week.

GSX shares peaked on Jan. 27, closing at $142.70 per share that day. They were trading Friday around $103, about double their price at the start of the year.

The Reddit investors also targeted heavily-shorted AMC Networks, the movie theater chain hurt by Covid-19, and Bed Bath and Beyond, the home goods retailer. Both remain among the top 50 most heavily shorted names.

Short interest in AMC is $299.3 million, after a decline of $442.6 million over the past month, including a $61.6 million decrease over the past seven days. Shorts currently make up 23.88 percent of the float.

The stock price of AMC peaked at around $20 on Jan. 27. On Friday afternoon it was trading at under $6 per share, a gain of over 150 percent for the year.

Meanwhile, short interest in Bed Bath and Beyond, which represents 22.94 percent of the float, has fallen by $1.36 billion over the past 30 days and is now only $700.7 million. Shorts fell by $165.8 million over the past seven days.

Shares of Bed Bath and Beyond — another Melvin Capital short — closed at $52.89 on Jan. 27 and were trading Friday at around $28, a nearly 60 percent increase for the year.