Recent market conditions have short sellers buzzing. After a year and a half of getting demolished while continuing to believe that the markets would crash, we are sitting in correction territory, where many popular tech firms have fallen by as much as 80 percent from highs. Shorts have profited from this, and they’re not afraid to boast about it. Investor confidence in these businesses has decreased, and people holding shares are questioning their decisions.
There’s also a case where shorts could be getting overconfident in their bets. Data shows that they are continuing to pile in on some of the high growth companies that have fallen from grace. More notably, short sellers are once again chasing their 2 favorite stocks: GameStop and AMC. Shorts believe that the shareholders of these two are growing impatient due to a lack of “meme activity” per say in the stock. No large institution is trying to hold shares of companies that might be headed for bankruptcy. This retail fatigue is their case for shorting these two stock market legends, and short interest now stands at 24 percent for GameStop and 22 percent for AMC, reaching year-high levels. However, there’s indication that investors decided to fight back. After this news was released, GameStop and AMC finished up 14 and 9 percent respectively, and chatter has started over a possible short squeeze incoming. If shorts get punched in the face once again, it will say a lot about the mentality and motivation of meme stock investors that could put an end to all of this. To be honest, it’s more impressive that they’ve been able to maintain these share prices for almost a year now, which gives direct opposition to the logic of short-sellers and analysts.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.