Citron Research Exits GameStop Short Position Amid Market Irrationality and Cult-Like Shareholder Behavior

Citron Exits Short Position on GameStop

Prominent short seller Citron Research has closed its short position on GameStop (GME) stock.

Rationale

Citron attributed its decision to "market irrationality" and "cult-like" shareholder behavior, as stated in a June 12 post:

"Citron is no longer short $GME. It's not because we believe a turnaround in the company's fundamentals will happen, but with $5 billion in the bank, they have enough runway to appease their cult-like shareholders."

Market Context

This move comes amid a significant rise in GME's stock price, which surpassed $30 after a 22.8% intraday rally on Tuesday. Currently, GME is trading at $30.49, up 3.3% in pre-market trading.

Analyst Outlook

GameStop analyst Michael Pachter of Wedbush has rated GME as "underperform" with a 12-month price target of $11, indicating a potential 60% drop from its current price.

Citron's Stance

Despite this bearish outlook, Citron opted to exit its short position due to prevailing market irrationality:

"Despite Wedbush setting an $11 target today, we respect the market's irrationality."

"After all, Dogecoin remains a $20 billion entity."

Market Sentiment

Citron drew a parallel to Dogecoin, which has a $20.2 billion market capitalization driven by social media hype despite lacking intrinsic value. This highlights the influence of market sentiment and risk appetite on valuations.

GameStop Fundraising

Amid the retail investor-fueled short squeeze, GameStop raised $2.14 billion by selling 75 million shares through an "at-the-market" equity offering on June 11.

Roaring Kitty's Role

Citron criticized Roaring Kitty (Keith Gill) for his controversial live stream, calling it "an insult to capital markets." Gill is reported to hold $181.4 million in GME stock and call options.

Citron's Future Stance

Despite the volatility and controversy, Citron has opted to monitor the situation from the sidelines for now.