It’s getting rough out there in retail land. Lockdown-bankrupted companies heavily shorted by big-named hedge funds for easily understandable fundamental reasons, are being buoyed by retail traders armed with government stimulus checks to gang up on those short positions and initiate short squeezes the likes of which have not been seen in a century. Platforms enabling retail trading are shutting off access to the most active stocks while allowing hedge funds short these stocks access to their own positions. It’s fomenting a major legal battle that is now just getting underway.
Trading in GameStop (NYSE:GME), currently the most popular of the ongoing short squeezes, was suspended on the Robinhood trading platform but has since been reinstated, causing enormous swings in the nearly-bankrupt brick-and-mortar video game seller that are continuing. The stock fell by 44% during the Robinhood suspension, but after hours after access was reinstated, the bid has gone back up to $311, a 60% post market close.
AMC Entertainment (NYSE:AMC) is another down-in-the-dumps name that has been in major decline since 2017. The Covid lockdowns and general fear of the virus even in states without lockdowns have decimated the movie theater chain after competition from streaming services already put the firm on the ropes. Short interest in the stock as of January 14th was 38% of the float, and shares have been squeezed to as high as $20.36 from a low of $1.16. That appears to be subsiding, for now, with shares down over 56% yesterday to $8.63, but the bid is now back over $10, indicating the decline may also be related to blocking trading of AMC on retail platforms as well.
On the other side of the equation are stocks that have done phenomenally well precisely because of the Covid lockdowns and bankruptcies of businesses that are forcing consumers to provide themselves the services that were once available elsewhere, like workouts at gyms. Peloton (NASDAQ:PTON) sells connected fitness machines with live and on-demand classes, and subscriptions services for continued training on its app. The stock is up 350% this year, hitting an all time high on January 14. Short interest is miniscule in this stock, but it is heavily owned by institutions at 71%, meaning it could become an inadvertent victim of the ongoing short squeezes if the institutions that own it are forced to raise cash in order to maintain their short positions that are being squeezed.
Slinger Bag (OTCMKTS:SLBG), a new company not yet making the retail frenzy news, has a similar business model to Peloton on the sense that it is trying to capitalize on the lockdown situation and enable tennis players to keep practicing in the current environment with a highly portable tennis ball launcher. It may be too early to tell yet, but revenues have tripled from Q2 to Q3, and the company has achieved its first gross profit last quarter. Whether it catches a “Covid bid” remains to be seen.