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Short sellers betting against GameStop Corporation (NYSE:GME) have reduced their holdings as the company's price dropped over the course of this month, reveals data from financial research firm S3 Analytics, LLC. GameStop and entertainment services provider AMC Entertainment Holdings, Inc (NYSE:AMC) have become the focal point of attention for retail investors who have joined forces through social media platforms such as Twitter and Reddit to make bulk purchases and drive up their share prices. This has created significant losses for hedge funds and other registered investment entities, who placed their bets against the pair's shares due to the prevalent business environment, their financial and their operating models.
GameStop Short Interest Drops By 33% In Two Weeks After Short Sellers Recover $840 Million Of Losses
At the start of this month, GameStop's shares opened at $249, and after they jumped to $302 in the second week, they have been on a downward spiral, resulting in an opening price of $209 today. The price drops helped the investors who bet against the company by selling its shares 'short' on the market as, before the end of the second week, they had accumulated losses worth $12 billion over the course of the year. Following the price drops, the short sellers profited slightly by recovering $840 million.
However, even though GameStop is down by more than 15% this month, the latest data from S3 Partners reveals that the short interest in the company has dropped. Short interest is defined as the market value of the shares that have been sold short, and the process involves these traders borrowing shares and then selling them on the market only to buy them at a lower price in the event of a price drop. This results in a profit, as the proceeds from the original sale allow them to buy more shares and keep the remaining to themselves after the ones borrowed have been returned to their owner.
The data reveals that GameStop's short interest currently stands at $1.76 billion after it dropped by $880 million in just two weeks following the short sellers' recovery. However, what is interesting to note is the fact that at the close of the second week of June, GameStop's short interest had grown by $400 million, and it looks as if the recent price drops have cajoled some of them to take their gains while they can.
Short Interest as a percentage of total GameStop shares floating currently stands at 14.5%, according to S3, after exhibiting a drop of roughly 4.5%. The number of shares shorted dropped by 889,000 last week, and as of now, 8.39 million GameStop shares have been sold short, reflecting a drop of 3.1 million shares since the end of the second week.
For AMC, the picture is different. Short interest of the company's shares currently stands at $4.8 billion, with 88.8 million shares being shorted. The shorted shares increased by 3 million last week, and when compared to 68.8 million shares at the end of this month's second week, they have grown by a whopping 30%. As opposed to GameStop, AMC's shares have gained more than 77% in value over the course of this month, and by the looks of it, the short-sellers are preparing for a crash. This conclusion is bolstered by the fact that the short interest has increased by roughly $1 billion during the second half of this month.
With the day's trading about to come to an end, GameStop made a surprising recovery at roughly 15:30 EDT, as its shares shot up to $215. AMC has also made slight gains, and it remains to be seen whether the battle between retail investors and hedge funds will continue.