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The meteoric rise in GameStop's stock price is being called a short squeeze by most but that's not what's happening, says an expert on short interest and the market.

Why it matters: That could mean that if and when the short squeeze does come, GameStop's price could soar significantly higher than its current levels.

What's happening: Short sellers have piled into GameStop as a result of its meteoric stock price rise, not the other way around, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, told Axios.

  • Over the past year the amount of shares shorted has increased by 12%, while the total dollars at risk have risen by 1,900%, S3's data show.
  • That's a sign that big bets are coming in from hedge funds and institutional investors, meaning that the short squeeze has not even begun.

How it works: In a typical short squeeze, short sellers have sold the stock and "rented" shares with the intent to buy them after the stock's price falls. But they are "squeezed" out if the price rises too much and they are forced to exit the trade by buying the stock at a higher price.

  • That helps the value of the stock rise because the short sellers join the momentum pushing the price higher.
  • But with GameStop, every time a short seller exits the market and buys shares, new short sellers are coming in to replace them, keeping the same downward pressure on the price and, in fact, short interest is increasing.

What it means: "That tells me what’s moving the market is the long buyers. This is not a short covering rally," Dusaniwsky said.

  • "If it was I would see shares shorted dropping precipitously. For this kind of price move, I would have to see short interest being wiped out."
  • "One way I can see short interest is not being wiped out is because the stock borrow rate is getting higher.
  • "That means shorts are not getting out on a net basis."

Go deeper

Axios-Ipsos poll: People of color face more environmental threats

Expand chart
Data: Axios/Ipsos poll; Note: ±2.5% margin of error; Chart: Sara Wise/Axios

Americans of color are much less likely than white Americans to experience good air quality or tap water or enough trees or green space in their communities, and they're more likely to face noise pollution and litter, a new Axios-Ipsos poll finds.

The big picture: Our national survey shows Black and Hispanic Americans are more likely than their white counterparts to live near major highways or industrial or manufacturing plants — and to have dealt in the past year with water-boil notices or power outages lasting more than 24 hours.

15 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.

15 hours ago - World

France recalls ambassadors from U.S. and Australia over submarine deal

Secretary of State Antony Blinken (L), French Foreign Minister Jean-Yves Le Drian (C), and French ambassador to the U.S. Philippe Etienne. Photo: Nicholas Kamm/AFP via Getty Images

France has taken the extraordinary step of recalling its ambassadors to the U.S. and Australia after both countries blindsided their French allies with a new military pact and submarine contract, the French Foreign Ministry announced on Friday.

The backstory: While sealing an agreement with the U.S. and U.K. to acquire nuclear submarines, Australia ripped up an existing $90 billion submarine deal with France. That led senior French officials to accuse the U.S. of a "stab in the back."