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'We should see the GME short squeeze continuing': S3 Partners

GameStop (GME) has already had quite the week, up almost 80% since Monday following news that board member and investor Ryan Cohen would play a key role in the business’s e-commerce strategy.

Bulls expect the presence of Cohen, who founded pet goods retailer Chewy, to help the company fulfill the potential GameStop fans believe it has as it transforms from a brick-and-mortar focused business to something more modern.

The GameStop bulls who see the company as an underrated, long-term value play may not be paying that much attention to the moves of the stock, but it’s hard to miss the roller-coaster ride. As the stock spiked on Wednesday, short interest continued to fall, perhaps after short-sellers learned their lesson in the late January squeeze, losing billions.

But according to Ihor Dusaniwsky of analytics firm S3 Partners, the short squeeze will continue.

“We should see the GME short squeeze continuing and more short covering in the stock as mark-to-market losses mount,” he told Yahoo Finance late Wednesday. “But as the stock continues its rapid climb, there will be short sellers waiting in the wings looking for entry points if this rally loses steam and GME’s stock price retraces.”

Short interest may have fallen, but it’s still significant: $2.76 billion with 11.18 million shares shorted, 20.52% short interest percent of float or 17.02%, depending on how you calculate it, according to Dusaniwsky. (S3 prefers the latter, as it doesn’t count the synthetic longs created from a short sale. If this is confusing, S3 has a good explainer here.)

To put this into context, fellow meme stock AMC Entertainment has a short interest percentage of float of 17.32%. Tesla, another famously shorted company, is at 5.98%, and Amazon at 1.03%.

“This has not been a profitable trading week for GME short sellers, after being down -$1.36 billion on Monday and Tuesday,” Dusaniwsky said. “[Wednesday’s] +7% price move added another -$202 million in additional mark-to-market losses.”

All in, GameStop shorts have now lost $6.8 billion year-to-date, Dusaniwsky said.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.