GameStop stock ‘volatility is still there’ while short positions have eased: Analyst

S3 Partners Managing Director Ihor Dusaniwsky discusses the sudden rise of Gamestop stock and breaks down the implications on financial markets.

Video Transcript

DAVE BRIGGS: All right, GameStop surging after reporting a beat on the top and the bottom line. Yes, GameStop beat on the top and bottom line on fourth quarter earnings. And look at shares up more than 33%, albeit from a relatively low level. Nonetheless, let's dive deeper into this report with Ihor Dusaniwsky-- good to see you-- S3 Partners managing director. Wow, what's your reaction to GameStop beat top and bottom?

IHOR DUSANIWSKY: Hey, Dave. Well, basically, release the hounds. Let the short squeeze begin. The shorts who were profitable to around 10:00 AM today, by the end of the day, they were down $30, $40 million, the mark to market P&L. After market trading, down, give or take, $300 million. So they're taking a big punch to the gut. We should see some big short covering tomorrow.

SEANA SMITH: Ihor, how much short activity have you seen in GameStop lately?

IHOR DUSANIWSKY: It's been around a million shares of short covering over the past month, around a half a million, 600,000 shares over the past week. So there's already a skew to shorts kind of losing some of their conviction. And the guys that got out did the right thing.

DAVE BRIGGS: For quite some time, GameStop's share price has been totally disconnected to the actual business. Is that still the case?

IHOR DUSANIWSKY: Yeah, this is a really momentum stock. You've got to sit there and look at what's going on with the meme stocks, the Reddits, the Twitter. This is not just a, what's the value, what's the earnings. This is what does the Street think that the price needs to be?

SEANA SMITH: Ihor, when we talk about some of the mechanics, some of the-- I guess, breaking down exactly the trading action that we have seen, has that really diverged from what we were seeing two years ago when we first started talking about GameStop as a meme trade?

IHOR DUSANIWSKY: Yeah, well, the short interest isn't nearly as much as we saw a couple of years ago. It's really calmed down a bunch, but the volatility is still there. And this is where the long players and the short players are making and losing money on a daily basis in size. And we're seeing big moves in the short side where we've seen for a while there, we saw shorts accumulating positions. This year, we're seeing shorts decreasing their positions. It's still a meme stock. It's still-- you're going to have a lot of action on both sides of the trade.

DAVE BRIGGS: Can you talk about the shorts that you've seen as related to First Republic? We've been trying to diagnose what happened with SVB. Of course, First Republic had a massive struggle. They have since rebounded, certainly, a great day today, on the words from Janet Yellen and Jamie Dimon and others. But how much short are you seeing there?

IHOR DUSANIWSKY: Yeah, we're seeing it's a small short amount just because the stock price is so low, $69 million. It's almost 6 million shares shorted. The big thing is we saw short selling into the issue, into the contagion, let's call it, with that 600,000 shares shorted since the 8th, almost a million shares short over the past month. So there was some short interest in this stock as the price started trending downwards.

SEANA SMITH: Ihor, when you talk about the regulators' activity here, going in, obviously, already with SVB and with Signature Bank, some talk about maybe the fact that they could potentially intervene again, Treasury Secretary Janet Yellen leaving that door open in comments earlier today. What's the fallout for some of these traders who would be short or potentially are short on these stocks?

IHOR DUSANIWSKY: I mean, look, you're up half a billion dollars in two weeks. So this is a big bunch of [INAUDIBLE] that you got in your pocket, but you can't buy a cup of coffee with it because you have to realize the trade. So what's going to happen is you're going to see some of these traders who are up big start closing out their positions and realizing their profits before they can't. Stocks get traded, you got bankruptcy, you got takeovers, you got whatever issues that come in this name. It's going to hinder the possibility of closing out a short position. So there's going to be a lot of trading in this name. A lot of it's going to be short covering because these guys want to cash in their chips.

DAVE BRIGGS: All right, great stuff. We'll have to leave it there. Ihor, thank you so much. Appreciate that.