GameStop’s Reddit Believers Find Hope in Short-Squeeze Mention
(Bloomberg) -- GameStop Corp.’s Reddit devotees have found a reason for optimism after a disappointing earnings report sent the stock tumbling as much as 22% on Wednesday.
Instead of a tweeted photo of an ice cream cone, this time they’re pointing to a disclaimer in the company’s annual report on the impact of a short squeeze on its shares as a harbinger of more gains to come. It’s among a very few references the video-game retailer has made to the maelstrom that sent its stock soaring more than 3,400% in the last year.
On page 15 of the filing, GameStop disclosed that a short squeeze could “dramatically increase the price” and “continue to lead to volatile price movements in shares.”
It’s an unusual item to see in such regulatory filings.
Since 2010, only 18 companies currently in the Russell 3000 Index have mentioned the phrase “short squeeze” in a quarterly or annual report, according to data compiled by Bloomberg.
Not all those that referenced short squeezes were doing so to alert investors to the potential impact on their own shares. Reinsurer Greenlight Capital Re Ltd., where David Einhorn oversees investments, used the phrase in the context of what could go wrong on a short sale they conduct. Thomas Peterffy’s Interactive Brokers Group Inc.’s use of the term was to disclose that it was the subject of class-action lawsuits in conjunction with its decision to restrict trading during the “Reddit-related short-squeeze” in January.
GameStop is the third Reddit darling to issue such a disclaimer this year. AMC Entertainment Holdings Inc. and American Airlines Group Inc. made similar references in their latest filings.
Members of the WallStreetBets forum on Reddit who noticed the anomaly were debating its implications and whether prior disclaimers presaged squeezes. And while they seemed to be taking the mention as a sign that the real action has yet to come, GameStop ended its commentary on a dour note.
“Stockholders that purchase shares of our Class A Common Stock during a short squeeze may lose a significant portion of their investment.”
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