Reddit's Top Bet GameStop Soars To Almost $200 After Expected Funds From Stimulus Checks

Following January's Reddit frenzy that caused major financial consequences for certain hedge funds and large losses for short-sellers, the hottest and most visible "meme stock," GameStop (GME) shares, continue to shoot up at $194.50 (+41.21%) until today's market opening according to Yahoo! Finance after investors hope for funds to flow from coming stimulus checks into the equity market.

“Maybe there’s a thought that if people are going to get a lot of money in their stimulus checks, that some of it’s going into the stock market,” explained Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group. “Some of it might go into those same names that we saw in late January, those message board Reddit-type stocks.”

Seconding Murphy's assumption, results of Deutsche Bank's poll for retail investors last month showed that they would bring more than a third of their stimulus checks into the stock market, potentially amounting to $170 billion in inflows. This financial activity is very much expected to happen since 53% of the bank's respondents even said that they had spent some funds from previous stimulus checks in the financial market. Retail stock and option buying have been some of the reasons that push markets higher over the last year.

Since tax analysts expect the US government to start distributing $1,400 checks almost immediately after the assistance bill is finalized and signed by President Joe Biden, urgent rallies are expected to occur that will force the meme stock and other bets of r/WallStreetBets from Reddit like AMC Entertainment (+15.4%), Koss Corp (+27.5%) and Rocket Companies (+3.0%) to zoom.

On the other hand, the CNBC news of the tech retailer recruiting shareholder and Chewy co-founder Ryan Cohen to spearhead a new committee to support the video game store chain's transition to e-commerce also heavily catalyzed GameStop's rapid increase to $194.50 - their highest closing amount since Feb. 1. At the session's peak, the market was up as much as 53%.

The company said it has established a new "Strategic Planning and Capital Allocation Committee" led by Cohen to find ways to improve its digital transition. Since the committee was created, the organization has appointed Matt Francis, a former Amazon Web Services innovation lead, as its chief technology officer. The committee also includes Alan Attal, Chewy's former top operations lead, and Kurt Wolf, Hestia Capital Management's chief investment officer.

Cohen's association with GameStop started last year which was a critical factor in the stock's recent wild craze. The tech leader invested in the company in order to encourage it to shift its emphasis away from traditional outlets and toward online purchases. GameStop's stock has increased 970% so far in 2021, valuing the company at $14.2 billion.

Now since Cohen's positive impact on GameStop's market value, its investors have intensely followed him on social media. Last February, some critics interpreted his latest tweet of an ice cream cone as a potential catalyst for GameStop's latest rally.

Given the distribution of stimulus checks and Cohen's movement, many investors also believe another short squeeze could be fueling the stock's recent gains. Clarifying to Reuters, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, says, “Shorts will continue to be squeezed out of their positions as GME’s stock price continues to trend upwards."

Nevertheless, customers are increasingly gravitating toward digital copies of console games, putting pressure on GameStop's rising sales.