Shares of GameStop Corp. surged two days after the videogame retailer said it would remake its board and as investors who bet the stock would weaken shifted their positions.
GameStop’s stock was trading up 70% as of early afternoon Wednesday to $33.94, marking a new five-year high, according to FactSet.
The Grapevine, Tex.-based company’s stock jumped sharply due to a so-called short squeeze, according to some analysts. That occurs when traders respond to an increase in price for a stock they bet would fall by purchasing shares they had sold to avoid losses.
Many traders had been betting that shares would fall, with short interest—expressed as a percentage of GameStop shares available for trading—exceeding 138% as of the end of last year, according to Dow Jones Market Data.
Traders betting that GameStop shares would weaken overlooked the company’s business selling used items at its physical stores, said Wedbush Securities analyst Michael Pachter.
