GameStop Stock Update as Reddit Investors Continue War With Wall Street

GameStop, the video game retailer that has seen a recent surge in stock value driven by investments from users on the subreddit r/WallStreetBets, saw its share price climb by 134.84 percent on Wednesday, reaching $347.51 at the close of the market.

The retailer's share price reached as high as $380 on Wednesday, up from $18 a few weeks ago. The stock value has risen a total of around 1,700 percent this month.

Two major investment firms—Citron Research and Melvin Capital—that shorted the GameStop stock, betting the retailer's share price would plummet, exited their positions on Wednesday, cutting their losses from the recent price surge.

Just a week ago, Citron Research was reported to have described GameStop as a "failing mall-based retailer" and bet against it, predicting shares would fall to $20 because it is "pretty much in terminal decline."

In a video message shared on Wednesday, the founder of Citron Research, Andrew Left, said the company "covered the majority of the short in the [$]90s at a loss, 100 percent, have a small manageable position and I'll let it go.

"We'll become more judicious when it comes to shorting stocks. Doesn't mean the industry is dead, but it just means you have to be more specific.

"Nothing has changed with GameStop except the stock price. Certainly interesting times," he added.

Noting he had "respect" for the market as well as "the people on the WallStreetBets message boards," Left advised the Reddit users: "When you make your profits, make sure you put some away for the IRS. The money is not all your money but at the end of the year you do owe tax money."

Melvin Capital also announced it had pulled out of its position on Wednesday.

"Melvin Capital has repositioned our portfolio over the past few days. We have closed out our position in GME (GameStop)," the spokesman said in a statement.

Earlier this week hedge funds Citadel and Point72 Asset Management were reported to have extended a lifeline to Melvin Capital with a $2.75 billion bailout following the company's loss of around 30 percent of the $12.5 billion it has been managing this year.

Amid talk on social media over the potential collapse of Melvin Capital, the spokesperson for the company confirmed: "The social media posts about Melvin Capital going bankrupt are categorically false."

On Wednesday, White House press secretary Jen Psaki noted the White House is "monitoring" the recent stock surge.

Psaki said at a press briefing Wednesday: "Our team, our economic team, including [U.S. Treasury] Secretary [Janet] Yellen and others are monitoring the situation.

"It's a good reminder though that the stock market isn't the only measure of the health of our economy. It doesn't reflect how middle- and working-class families are doing," she added.

In a statement Wednesday, the U.S. Securities and Exchange Commission noted: "We are aware of and actively monitoring the ongoing market volatility in the options and equities markets and, consistent with our mission to protect investors and maintain fair, orderly, and efficient markets, we are working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants."

The GameStop stock price briefly fell on Wednesday by 20 percent after r/WallStreetBets was temporarily closed to the public.

Discord, the online chat platform, removed a WallStreetBets server "for continuing to allow hateful and discriminatory content after repeated warnings," it said in a statement.

Discord stated: "To be clear, we did not ban this server due to financial fraud related to GameStop or other stocks. Discord welcomes a broad variety of personal finance discussions, from investment clubs and day traders to college students and professional financial advisors.

"We are monitoring this situation and in the event there are allegations of illegal activities, we will cooperate with authorities as appropriate," the statement said.

Gamestop store NYC January 2021
Signage at a GameStop store in New York City, pictured on January 27. The video game retailer has seen a massive surge in stock value driven partly by investments from users on the subreddit r/WallStreetBets. Michael M. Santiago/Getty Images