Feb 25, 2021 - Economy

Behind GameStop's latest stock surge

Dollar with game system

Illustration: Aïda Amer/Axios

Back in focus: The meme stock trade.

By the numbers: GameStop finished up 19%, after a wild day that saw shares spike as much as 80%.

Why it matters: The moves are muted compared to the eye-popping gains that shocked the world last month.

  • But the surge means online traders banding together on social media boards could be a lasting feature of the U.S. stock market.

What's going on, technical answer: The steep gains that started Wednesday night were "mostly long buying with short covering sprinkled in to help grease the skids up," says short-selling expert Ihor Dusaniwsky.

What's going on, more fun theory: A CFO resignation and a tweet featuring an ice cream cone are riling people up.

  • GameStop says its chief financial officer is resigning — an executive who was once respected (at least by traditional investors) for helping shape up the company's finances.
  • The C-Suite swap is now seen as an opportunity for change, a theory fueled by a picture of a McDonald's ice cream cone tweeted out by board member Ryan Cohen — a major shareholder who gained a board seat (and thus more influence) earlier this year.
    • Much like McDonald's is known for fixing its broken ice cream machines, the thinking is Cohen was signaling that he would "fix" GameStop.

What they're saying: "This doesn't make any sense," Anthony Chukumba, a longtime Wall Street analyst, told CNBC Thursday of GameStop's wild rally.

  • "And you know what, call me a boomer. I'm totally fine with that."
  • He said the stock is worth $10, at the most.

What to watch: All eyes will be on GameStop if and when the company takes advantage of the hype to grow its struggling business.

  • It wouldn't be the only Reddit stock to do so: AMC took advantage of its stock surge by swapping roughly $700 million worth of debt into equity.
  • It's "curious" that GameStop hasn't issued shares at this soaring price — a move companies do to raise money, Telsey Advisory Group's Joe Feldman tells Axios.
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