GameStop stock whips skeptics with surge of up to 94%

GameStop Corp. shares soared to their highest level in more than five years Wednesday as short-sellers betting against the stock scrambled for the exit.

Shares of the Grapevine, Texas-based video-game retailer surged as much as 94% to an intraday high of $38.65 apiece before settling at $31.40. The last time shares traded at that level was in November 2015.

Ticker	Security	Last	Change	Change %
GME	GAMESTOP CORP.	27.91	-0.52	-1.84%

The spike appeared to be driven by a short-covering rally sparked by an agreement the company reached with activist investor RC Ventures regarding the addition of three board members.

Short interest last month reached 138% of shares outstanding, according to FactSet data. Short-sellers borrow shares in order to sell them with the hopes of buying them back at a lower price in the future.

The new directors, including Ryan Cohen, founder of RC Ventures and the online pet food supplier Chewy, all have extensive experience in e-commerce, online marketing, finance and strategic planning.

RC Ventures in September purchased 6.5 million GameStop shares to raise its stake to 9.98% with the goal of transforming the company into a major e-commerce player that sells a wide variety of merchandise with fast shipping.

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The attempt to turn around GameStop’s business comes at a critical time for the company, which has suffered through store closures amid the COVID-19 pandemic at a time when more users were already purchasing their video games online.

GameStop on Monday reported comparable sales for the nine weeks through Jan. 2 rose 4.8% from a year ago, bolstered by a 309% increase in online revenue. Total sales were down 3.1% as the number of store locations decreased 11% during the pandemic.

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GameStop expects demand for the new Microsoft Xbox and Sony PlayStation gaming systems to drive sales into 2021 once supply-chain constraints ease.

Shares were up 5.89% this year through Tuesday, outperforming the S&P 500’s 1.2% gain.