GameStop's Short Sales Surge 234% Triggering NYSE Restriction

The New York Stock Exchange (NYSE) has implemented a Short Sale Restriction (SSR) on GameStop after the short sales volume surged dramatically. The total number of shares sold short within a specific timeframe for GameStop (GME) increased by 234% over 24 hours, reaching 30.85 million shares sold on March 27. This spike in short sales volume triggered the SSR, which is activated when a stock drops over 10% from the previous day’s closing price. GameStop’s stock fell 22% over the trading day, erasing its 12% gain from the Bitcoin announcement and more.

At the time of publication, GME was trading at $22.09. The SSR rule is applied for the rest of the trading day and the following trading day. Kevin Malone, president and CEO of Malone Wealth, commented on March 27 that “GameStop traded 50x more shares today than last Thursday. Not statistically possible without naked short-selling.”

GameStop’s short sale volume on March 27 reached 30.88 million, a level reminiscent of the January 2021 short squeeze. During that period, GameStop stocks skyrocketed after a significant short squeeze, resulting in substantial losses for hedge funds and other short sellers, while some retail traders made considerable returns. The highest point reached during that month was 33.26 million shares on Jan. 19.

GameStop announced a $1.3 billion convertible notes offering after the markets closed on March 26, but did not specify how much Bitcoin it plans to purchase. Some analysts and commentators have questioned GameStop’s plan to start purchasing Bitcoin. Tom Sosnoff, founder and CEO of Tastylive, described GameStop's decision to buy Bitcoin as feeling “a little dot-comish.” He suggested that the move seemed more like an attempt to capitalize on a trend rather than a strategic business decision.

Meanwhile, Bret Kenwell, a US investment analyst, noted that “investors are not necessarily optimistic on the underlying business.” The biggest day of short sales for GameStop occurred on June 3, 2024, when it reached 46.20 million. This spike was around the time Keith Gill, a stock trader known for the GameStop short squeeze in 2021, revealed that he had started trading GameStop stock again, this time with $180 million to play with.

GameStop stated that the convertible senior notes—debt that can later be converted into equity—will be used for general corporate purposes, including acquiring Bitcoin. Some analysts see the convertible notes offering announcement as the reason for the stock’s decline. Han Akamatsu suggested that GameStop’s stock is dropping for the same reason Strategy (formerly MicroStrategy) declined after issuing convertible notes. He noted that in 2021, MSTR issued $1.05B of 0% convertible notes, and the stock dipped after the announcement due to hedging shorts, but later exploded when Bitcoin surged and the arbitrage unspooled. Akamatsu added that if GME or BTC goes up significantly, the trade could become very interesting as there is a squeeze opportunity here.