GameStop Extends Surge as Chewy.com Founder’s Arrival Stirs Buzz
(Bloomberg) -- A four-day surge in GameStop Corp. on the back of retail-investor demand has added $1.2 billion in market value to the vide-game seller since activist investor and Chewy Inc. co-founder Ryan Cohen joined its board on Monday.
The stock jumped as much as 23% Thursday and touched a high at $38.55, more than double its Friday’s closing price. Demand from day traders propping the company’s outlook on message boards and social media, combined with short covering, is fueling the seemingly unstoppable run.
The stock’s advance marks its best winning streak ever and comes in the face of skeptical analysts who had broadly advised investors to stay away. Still, many traders are betting the Grapevine, Texas-based retailer will undergo a renaissance, or be sold, after the arrival of Cohen and two other former Chewy colleagues to the board.
Cohen previously helped build up online pet retailer Chewy, which was acquired by PetSmart for $3.35 billion two years before it went public in 2019 and saw its market value surge. His firm, RC Ventures LLC, is GameStop’s second largest shareholder and has been pressuring the company to undertake a strategic review, cut costs and add more variety to its online offerings. Alan Attal and Jim Grube, former Chewy employees, are also joining Cohen on the board.
Telsey Advisory Group is the lone firm with a buy-equivalent recommendation on shares, according to data compiled by Bloomberg. That compares to four analysts who advise holding shares and three who recommend selling. Wall Street’s average price target of $12.36 implies downside of roughly 70% over the coming year.
Gordon Haskett analyst Don Bilson called the rally “vicious” after Wednesday’s 57% gain, saying “it’s not really clear to us what got the ball rolling” other than elevated short interest and the stock’s recent rally.
Bets against the company have climbed over the past year with 138% of shares available for trading currently sold short, data compiled by S3 Partners shows. The need for investors to cover those positions is likely fueling a short squeeze and also fanning the stock’s run.
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