LONDON, Jan 25 Reuters Shares of U.S. videogame retailer GameStop were up by about 50 in premarket trading on Monday, on course to reach another record high after having already gained about 250 since the beginning of the year.
Traders believe that the reasons for the jump in the shares are shortsellers quickly buying back into the stock to cover potential losses, defined as a shortsqueeze, and retail investors piling in to benefit from the surge.
The short betting was pretty evident with 100 of the shares available to borrow to speculate against the company already out on loan, FIS Astec analytics data as of Friday showed.
Short sellers typically borrow and sell shares in companies they expect will fall in price, hoping to buy them back at a lower price and pocket the difference.
The trading strategy is high risk in that losses are theoretically unlimited when the stock rises instead of falling.
Some investors believed GameStops retail business model was outdated and took bets against the company.
Last week, shortseller Citron Research said the stock would be back to 20 fast.
Backers of the stock cheered GameStops announcement on January 11 about appointments to its board to double down on digital sales.
At 1119 GMT, GameStop shares were up 46.8 at 95.10 in premarket trading in the United States while surging more than 70 in cash trading in Germany.
I think this is like a carousel this morning U.S. retail is adding fuel to the fire on Friday, which triggers…