In Tuesday’s Morning Brief, Myles Udland explains Monday’s wild trading session, and why the shorts are getting squeezed on names like GameStop and BlackBerry.
Video Transcript
MYLES UDLAND: All right. Welcome back to Yahoo! Finance Live. Myles Udland here in New York on this Tuesday morning. Let's take a quick look at futures as we get set for the second trading day of this week. Again, higher across the board, not a whole lot going on. But all of the action has been happening this morning and yesterday and the last couple of days underneath the surface.
Let's start by taking a look at shares of GameStop. They are higher once again this morning. And we have covered here on this program and across Yahoo! Finance. You've seen it, I'm sure across all financial media. Sort of the dynamic that's playing out between folks on Wall Street Bets, which is the Reddit form where individual investors like to gather and talk about their trades using colorful language, to say the least.
And what's happening on Wall Street side where we've got a lot of people short this stock. This was a $4 stock, folks, six months ago. So this thing has come quite a long way. Last week, the whole story kind of crescendoed with Andrew Left over at Citron Research saying that he wanted to be short shares of GameStop, the rally had run too far.
But let's be clear, Brian Sozzi, Left was calling for GameStop to go to $20 per share. And as I just said it was a $4 stock six months ago. So he's still conceding a 5x gain in a name that I think everyone kind of has a view on. And so really it's just-- this story has certainly gotten away from whatever the oh, it's great that Ryan Cohen, founder of Chewy is now involved. Clearly, we're talking about something else if you look at that chart.
BRIAN SOZZI: Yeah, I think Andrew Left might be betting on the fact that GameStop is going to report earnings in a couple weeks. And the true company that is GameStop will come out and shine and justify that it does not deserve to be trading at these levels, probably deserves to be trading at $10 a share, or at least the $20 that CItron put out.
But I think a large part of what you're seeing in this gain, and we've been talking about it, the short killers, as I have been calling them. They expect GameStop to come out here and say bullish things on the next product cycle, the hardware cycle, the Sony, the Playstations, and then, ultimately, that a Cohen comes in here and turns GameStop into some form of new Chewy.
I don't know what that looks like. I suspect a lot of these traders out there buying GameStop, they definitely don't have a clue what that looks like and that is a big problem moving forward.
JULIE HYMAN: There's a really interesting TikTok on this whole thing that Bloomberg did that you can find on YahooFinance.com under the ticker of GameStop. And reading it this morning really crystallized this for me. It doesn't have anything to do with Cohen, it doesn't have anything to do with the outlook.
This is a mini revolution, right, this is these day traders and these people on Reddit coming out and saying-- and it's sort of reflective of the overall political environment as well, right. This is a rigged game, and we're going to take it back and bring it on our side, right. That's sort of what-- I mean, yes, they made money in the process. That's part of it.
But it's sort of this seeing a manipulated system and making their own manipulations appears to be what's going on here. This sort of concerted effort to push back against the shorts. And they've gotten ahead, right, in the form of Melvin Capital Management, which was on the short side of this, and now is having to get bailed out by Citadel and Point72 Asset Management, Steve Cohen's firm. $2.75 billion is how much they're having to put into that hedge fund, which had shorted a number of names, including GameStop. So there's this really interesting story behind just this price option that we keep watching day after day.
MYLES UDLAND: So I think-- I do.-- I think there's a few things there. On the second point of this is now, basically, the Redditors figuring out that Wall Street gains for me but not for the-- on figuring that out. I mean, look at a name like a Blackberry. Look at what's happening with Nokia. Look at what's happening with Bed, Bath, and Beyond. Heavily shorted names, or in the case of Blackberry, not even that heavily shorted.
I mean, shoot, what's happening with Beyond Meat this morning is probably part of this. That's a 25% sold short stock, and investors are flooding in there. We say what's going on with Beyond Meat? Well, we don't really have to look much further than this conversation.
But I do think that the history of the GameStop position, in particular, is worth exploring in the sense that this was a fundamental view that someone named Roaring Kitty, who streams on YouTube and buys stocks, had back in August-- this guy has a lot of followers. A lot of people watch this. In August, at $4 a share, he's like I like GameStop from a value perspective. So again the stock went from $4-- It went from $4 to $20. That's an amazing run.
You can see there, basically, by the first of the year, what's happened so far in 2021 is a version of this kind of crazy bull rate, I guess we could call it, though, again, it's not so different from anything that's happened in all kinds of chat rooms on Wall Street for years and years. But I think that what's the challenge here is there are two sort of stories.
As we're looking at here. The squeeze out the shorts no matter what-- I mean, iRobot, right, like all of a sudden, Roombas, I guess everyone thinks they're going to have a great holiday quarter. No, I don't think so. I think it's because iRobot is a heavily shorted name that the stock is up that much. So there's that story.
But there are also people who earnestly are out there trying to seriously value invest and can be just as good at that as anybody else we're going to bring on the show.
BRIAN SOZZI: I'll just add this, too. I don't, in terms of GameStop, I don't think it has been rigged. Let's keep in mind. This has been a terrible, terrible fundamental story for five, 10 years. I mean, this has been-- this whole stock, the whole company has been left for dead. And I would still argue, in 10 years, if the company is even still around.
It's almost as if these short sellers here, say you know what, one walked into a mall. They saw a GameStop. They remember going there and buying video games as a kid. And they went out and started these rumors in a Reddit chat room. And they pulled a name out of thin air, much like the rest of all these companies.
MYLES UDLAND: And I would just say-- I would just say, too, I think the thing with public short selling, in particular, it's kind of playing hero ball. Like I know it sounds really smart to have a short thesis on a name. But on everyone, as you mentioned Sozzi, has bet against a company that's clearly in secular decline. It's kind of a flex. Like I'm going to be the guy that calls GameStop going to zero, it's like well maybe, you're the guy the shorts GameStop at five before it goes to 80. I don't know. That's another side. That's another possibility there.
BRIAN SOZZI: We have no positions in any stocks mentioned?
MYLES UDLAND: No, of course not. I'm saying the stock went down 95% in 10 years or whatever it was. And then you want to come in and now I'm going to be the hero. Well, this is kind of what happens when you end up on the wrong side of that. Your old boss comes along with a couple of billion dollars to bail you out.
