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Investors betting against video game retailer GameStop Corporation have continued to make staggering losses throughout July, reveals new data released by research firm S3 Partners, LLC. Gamestop, a quintessentially American brand, came at the center of a row between hedge funds which 'shorted' its shares by borrowing them and hoping that the price would fall, and retail investors who joined forces on the social media platform Reddit to drive the share price upwards in hopes of dealing the hedge funds massive losses.
The Redditors' plans came to fruition as GameStop's share price shot to an all-time high of $347 in January, resulting in some of the biggest hedge funds who bet against it reporting losses worth billions. Now, S3's data shows that the short-sellers have cumulatively lost $6.3 billion by the third week of June, with the Reddit side often claims that S3's data is biased due to its relationship with the hedge-funds who are shorting the stock.
GameStop Short Interest Drops By $390 Million During First Three Weeks Of July But Retains Longer-Term Flat Trend
The strength of GameStop's share price boost, which is unsupported by the company's fundamentals, is evident by the year-to-date gains made by the shares so far. While their peak price of $347 took place in January, shares are trading at $157 at 12:05 EDT today, after having gained value by 217% over the past six months.
The latest data shared by S3 partners reveals that short interest for GameStop stood at $1.37 billion by the end of the third week of July. Data by the same research firm reported that the short interest stood at $1.76 billion at the end of June after it had dropped by $880 million over the last two weeks of the month.
More importantly, S3 also outlines that in July, cumulative mark-to-market losses experienced by the short-sellers stood at $6.3 billion. This indicates that the 'shorts' have made some recoveries since data from the first week of June outlined losses of $7.3 billion after they lost roughly $1 billion in the first week of the month.
Finally, even as the short interest dropped, also likely due to the downward price movement for GameStop in July, the battle between retail and institutional investors is showing no signs of slowing down. A longer-term look at the short interest and share price shows that the latter has remained flat after dropping since the January peak.
As the battle heated up over the course of this year, the retail camp has expressed its doubt about the data shared by S3. Their narrative suggests that the research firm is owned by one of the hedge funds that helped bail out Melvin Capital earlier this year after the fund took in losses more than 50% after the price gains in January.
Citadel Securities, which is alleged of foul play in the entire affair, has dismissed all claims as conspiracies. It also has a close partnership with the popular trading platform Robinhood. Earlier this year, in prepared statements submitted to the U.S. House of Representatives' Committee on Financial Services in February, it denied any role in limiting Robinhood's decision to limit GameStop trading.
However, retail investors remain unconvinced, as they allege that hedge funds continue to make buy orders in dark pools and sell orders normally to manipulate prices. Dark pools are spaces where big firms and investors can submit their larger orders to avoid a large impact on a security's price. The retail camp alleges that this is being done to create a false impression of short-sellers exiting the market so that the real investors lose interest in shares such as GameStop's.