With the Microsoft $MSFT partnership and the Ryan Cohen investment in GameStop $GME , many people have been expecting a short squeeze to happen. But so far, we cannot see it with more than 100% of shares outstanding being shorted. What will trigger this short squeeze?
Let's look at Tesla $TSLA which had a short squeeze in 2012. 60% of float were being shorted but good numbers about the sales of the Model S triggered a short squeeze and the stock gained over 800% in just 2 years. Tesla was a growth stock at the time, GameStop is not. We cannot expect the same trigger for GameStop.
The launch of the Sony $SNE PlayStation 5 could also be a trigger.
Since there are many activist investors involved with GameStop, corporate actions could also trigger a short squeeze. We are in the current situation today because Michael Burry sent a letter last year asking the management to buyback shares.
Or maybe the short squeeze will just happen because of fundamentals, for example, like with Restoration Hardware $RH . The management took the decision to buy back shares, then improvement in the fundamentals caused a short squeeze, the investment from Warren Buffett made it worse. The short squeeze is still happening.
Nobody knows what will trigger the short squeeze and how long it will last. This is a long-term game. At current price, I believe that GameStop is very cheap. What we should do is ignore the short squeeze and focus on the fundamentals.
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