GameStop (GME) Short Seller Citron Throws in the Towel Citing ‘Market’s Irrationality’

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As a researcher with extensive experience in analyzing financial markets and meme stocks, I’ve closely followed the recent developments surrounding Citron Research’s decision to exit its short position on GameStop (GME). While I have long held bearish views on GME’s prospects due to fundamental concerns, the market’s irrationality, fueled by retail investors and social media hype, has led Citron to make an unexpected move.

Known short-seller Citron Research, famous for its bearish stance on meme stock GameStop (GME), has disclosed that it has closed its short position on the company’s stocks, acknowledging the market’s unexplainable behavior.

In a recent update on microblogging site X (previously Twitter), the short seller has stopped betting against GameStop (GME) shares not due to confidence in the company’s potential recovery, but instead because “with a $5 billion war chest, they now have sufficient resources to placate their fervent shareholder base.”

I’ve analyzed the market trends and noticed an intriguing development with GME. After experiencing a substantial rally, its share price reached a peak of over $30 on June 11, resulting from a remarkable 22.8% surge in a single day. However, this upward momentum took a slight pause, causing the shares to trade slightly below that level currently. On a year-to-date basis, I’ve observed a remarkable increase of more than 72% for GME’s shares.

Although some analysts maintain pessimistic views regarding GameStop’s future, with Wedbush’s Michael Pachter predicting a $11 price, Citron chose to abandon their short position due to the “unpredictable market behavior” causing potential losses.

Citron has covered its short position on $GME stocks now. This isn’t due to optimism about a potential company turnaround, but rather because Citron possesses $5 billion in funds, enabling them to satisfy their devoted shareholder base. Despite Wedbush establishing an $11 price prediction today, we acknowledge their analysis.— Citron Research (@CitronResearch) June 12, 2024

The company expressed its belief that the crypto market can be unreasonable at times. As an illustration, it noted that Dogecoin, a cryptocurrency influenced by memes and currently valued at around $20 billion, continues to exist.

Citron also expressed concerns about the potential dampening effect of GameStop’s recent stock offering. The company raised $2.14 billion by selling 75 million shares, a move fueled by the renewed hype surrounding the stock after a live stream by Keith Gill, the retail investor known online as “Roaring Kitty,” which Citron called “an insult to capital markets.”

According to reports, Gill’s holdings in GME stock and call options are estimated to be worth more than $180 million at present. If the share price of GME reaches and surpasses the $67 threshold, Gill could potentially amass a fortune amounting to billions.

Noteworthy is the fact that the meme stock trading craze gained momentum following RoaringKitty’s reemergence on social media after a three-year absence, which occurred post-testimony before the Congress.

AMC Entertainment, the well-known movie theater company traded on NYSE under the ticker symbol AMC, saw notable growth, just like several less recognized cryptocurrencies linked to Roaring Kitty and GameStop.

Vlad Tencev, CEO of Robinhood, has reassured investors in a Fox Business interview that the trading platform is ready for the expected market turbulence surrounding GameStop. He highlighted the substantial infrastructure upgrades implemented to manage such volatility.

According to a report in the Wall Street Journal, trading platform E*Trade is contemplating barring the use of its service by trader Gill due to suspected stock manipulation.

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2024-06-12 20:07