AP
- AMC stock surged as much as 420% on Wednesday.
- Day traders also sent GameStop shares soaring, along with BlackBerry and Bed Bath & Beyond.
- Amateur investors are seeking quick profits from heavily shorted stocks.
- Visit Business Insider’s homepage for more stories.
AMC shares skyrocketed as much as 420% on Wednesday as day traders piled into heavily shorted stocks for a third consecutive day. The stock rally added up to $7 billion to the cinema chain’s market capitalization.
Frenzied buying also drove GameStop shares up as much as 160%, BlackBerry up 31%, and Bed Bath & Beyond up 46%. The four companies gained a combined $29 billion in market capitalization at their peak stock prices.
Amateur investors have gathered, most notably on the Reddit forum r/wallstreetbets, to pinpoint stocks they can buy en masse with the hope of scoring fast profits. They frequently target stocks that are popular shorts, as driving their stock prices up can pressure short-sellers into buying shares back to cover their positions, which sends prices even higher.
Day traders also see the strategy as a way to stick it to Wall Street. They have targeted hedge funds such as Melvin Capital, which had negative positions in 17 US-listed stocks at the last count. Four of those – GameStop, Bed Bath & Beyond, Dillard’s, and Ligand Pharmaceuticals – jumped at least 10% on Wednesday.
The GameStop frenzy is especially divisive. The billionaire investor Chamath Palihapitiya bought bullish options on the video game retailer’s stock Tuesday at the urging of his Twitter followers, while Tesla CEO Elon Musk tweeted the word “GameStonk!!” with a link to the Wall Street Bets subreddit.
In contrast, Michael Burry of “The Big Short” fame sent out a swiftly deleted tweet Tuesday condemning the frenzied buying of GameStop stock as “unnatural, insane, and dangerous.” The investor, who has most likely made a fortune on GameStop, also called for legal and regulatory action against those involved.
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