Citron Research, a prominent short seller known for its bearish position on meme stock GameStop (GME), has revealed it exited its short position on the company’s shares as it noted it respects the “market’s irrationality.”
In an announcement on the microblogging platform X (formerly known as Twitter), the short seller is no longer shorting GME stock not because it believes the company will manage to turn around its current situation, but rather because “with $5 billion in the bank, they have enough runway to appease their cult like shareholders.”
The announcement comes on the heels of a significant rally for GME, whose price surged above $30 a share on June 11, following a 22.8% intraday jump, before endirong a slight correction to now trade just below that mark. Year-to-date, GME’s shares are up more than 72%.
While analysts remain bearish on GameStop’s long-term prospects, with Wedbush analyst Michael Pachter setting a $11 price target, Citron opted to exit the short position rather than risk further losses citing the “market’s irrationality” for its decision.
The firm also suggested there’s irrationality in the cryptocurrency market, pointing out the meme-inspired cryptocurrency Dogecoin ($DOGE) “remains a $20 billion entity.”
Citron also expressed concerns about the potential dampening effect of GameStop’s recent stock offering. The company raised $2.14 billion by selling 75 million shares, a move fueled by the renewed hype surrounding the stock after a live stream by Keith Gill, the retail investor known online as “Roaring Kitty,” which Citron called “an insult to capital markets.”
Gill reportedly holds a significant position in GME stock and call options, currently valued at over $180 million, and could become a billionaire if the price of GME tops the $67 mark.
It’s worth noting that the recent meme stock trading frenzy started after RoaringKitty returned to social media from a three-year hiatus that ended after his testimony in Congress.
AMC Entertainment (NYSE; AMC), a movie theater chain, also experienced a significant uplift, as did various lesser-known cryptocurrencies associated with Roaring Kitty and GameStop.
Robinhood CEO Vlad Tenev has assured investors that the trading platform is well-prepared for the anticipated GameStop frenzy, emphasizing significant infrastructure improvements made to handle such market volatility while speaking on Fox Business.
Notably the trading platform Gill has been using, E*Trade, is reportedly considering banning the trader over potential stock manipulation according to the Wall Street Journal.
Featured image via Pixabay.
