Aussie mining company GME Resources Limited’s stock surges after being mistaken for GameStop

A little-known Aussie company has been on a wild ride after it was mistaken for the similarly named cult US stock GameStop.

A little-known Australian mining company saw its share price soar as much as 50 per cent on Thursday, after investors appeared to mistake it for the similarly named cult US stock GameStop.

GME Resources Limited — listed as “GME” on the Australian Securities Exchange — surged in early trading, with the market taking an unexpected interest in the tiny Western Australia-based nickel miner.

Trading volume in the company was at more than 20 times the normal average, leading some to believe that GME had been mistaken for GameStop, which has the ticker “GME” on the New York Stock Exchange.

GameStop, a struggling US video game retailer, has seen its stock surge about 1000 per cent in two weeks after a group of amateur investors active on the online forum Reddit banded together to fight the Wall Street funds that had pushed its price lower.

“When I opened my share tracking app and saw it was at 9.4 cents, I was stunned,” GME’s managing director Peter Sullivan told the Sydney Morning Herald.

“It just went bang, and I thought, ‘well, what’s going on here’? Is there something about my own company that I don’t know?” The company’s management had no idea what was happening until a younger family member explained.

“There were emails and text messages from people flying around, and eventually my brother’s son, who works in Sydney, told us it was about speculation to do with the ticker GME.”

Close to the end of trade on Thursday, the Australian company was still trading up 19 per cent for the day, beating the country’s top listed firms, which were down more than two per cent.

A tiny West Australian mining company has been caught up in the GameStop investing craze. Picture: Michael M. Santiago/Getty Images/AFP

WHY HAVE GAMESTOP SHARES BEEN SO VOLATILE?

GameStop, a well-known retail chain whose business model of selling games on discs appears to have been overtaken by a move to the internet, has been the target of “short sellers,” often big hedge funds that bet on a decline by selling borrowed shares in the hope of repaying at a lower price.

But a group of amateur investors, organising via the online platform Reddit, has fought the trend. A group calling itself WallStreetBets, with some three million members who exchange tips and boast about beating “the system,” is credited with pushing up GameStop shares and roiling the Wall Street establishment.

Some analysts have described the situation as a “nerds vs Wall Street” battle. Jaime Rogozinski, founder of WallStreetBets, said the movement “is able to do what Occupy Wall Street was never able to do but on a completely different angle.”

“Occupy Wall Street was fed up with this saying ‘It’s a game we can’t play, you’re forgetting the little guy.’ Now the little guy figured out a different way around it,” he said.

The WallStreetBets forum had restricted access to those outside its 3.6 million subscribers for a few hours Wednesday evening, but was again visible to the public by 0115 GMT early Thursday.

GameStop is a well-known retail chain whose business model of selling games on discs. Picture: Spencer Platt/Getty Images North America/AFP

WHAT IS A ‘SHORT SQUEEZE’?

The WallStreetBets followers have been on a GameStop buying spree, which not only pushes up the shares but puts pressure on short sellers to make purchases to “cover” their bets to avoid steeper losses.

This is known on Wall Street as a “short squeeze” and can result in a dizzying rally by forcing short sellers into becoming buyers.

As a result, GameStop surged 18 per cent on Monday, another 115 per cent Tuesday and had leapt 135 per cent Wednesday. That followed a stunning 50 per cent jump on Friday.

Short sellers, while reviled by some market players, are nonetheless seen as playing an important role in the markets by providing liquidity and driving down overpriced shares.

But at least one GameStop short seller said he walked away from the stock after what he claimed was harassment and threats by an “angry mob.”

SHOULD REGULATORS INTERVENE?

The extreme volatility has raised concerns about manipulation, which could lead to an investigation by stock market regulators, and has even drawn attention from the White House.

“Our economic team including (Treasury) Secretary (Janet) Yellen and others are monitoring the situation,” said White House spokeswoman Jen Psaki.

“It’s a good reminder, though, that the stock market isn’t the only measure of the health of our economy.” Late Wednesday, the Securities and Exchange Commission said it was monitoring the activity.

“We are aware of and actively monitoring the ongoing market volatility in the options and equities markets and... we are working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants,” an SEC statement said.

Jacob Frenkel, a former enforcement lawyer with the SEC, said the situation warrants regulatory review.

One option would be “a trading pause for 10 days to ensure that all investors would have access to accurate and timely information,” Frenkel said.

Senator Elizabeth Warren also called for scrutiny.

“For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price,” she said in a statement.

“It’s long past time for the SEC and other financial regulators to wake up and do their jobs.”

The Reddit group now has 3.7 million members with calls to target the fat cats of Wall Street. Picture: Supplied

WHAT HAPPENS NOW?

The GameStop drama is far from over. And there are signs the movement may be spreading to other shares hit by short sellers.

Tesla founder Elon Musk -- who has waged his own battle with short sellers before seeing spectacular gains for the electric carmaker -- appeared to encourage the movement by tweeting a link to the Reddit forum along with the cryptic comment “Gamestonk!!” Billionaire Chamath Palihapitiya fuelled buying this week by buying options, but later told CNBC he had closed out his positions.

“I’d encourage anyone who is dismissive of this to go into WallStreetBets and read the forum,” he told the financial news channel.

AMC Entertainment Holdings shares jumped 300 per cent on Wednesday and BlackBerry was up some 33 per cent with apparent support from the rebel trading group.