Rocket closes up 71% in GameStop-like rally as Redditers buy mortgage lender
It appears Rocket Companies Inc. may be the next stock favored by the day traders on Reddit who drove up the cost of GameStop Corp. shares last month.
Shares of the parent company of billionaire Dan Gilbert's mortgage lender Rocket Mortgage closed up 71% on Tuesday afternoon. Like the beleaguered video game retailer GameStop, Rocket is among the most shorted stock with investors who are betting that the share price of the stock will fall — bears to the bullish retail investors on the WallStreetBets forum.
Rocket is the ninth most shorted stock, according to MarketWatch, with almost 40% of its available shares being sold short mostly by hedge funds. That makes it a target of investors who have cooperated together this year, buying "meme" shares of heavily shorted companies to squeeze out the short sellers.
Trading on Tuesday was positioning Rocket to have its best day ever since its initial public offering in August. Its IPO was $18, and the share closed at $41.60 on Tuesday afternoon — up $17.30 per share on the day.
Rocket last week recorded a record $9.4 billion in profit amid a housing and refinancing boom. The company also announced a dividend of $1.11 per share for later this month. Investors, however, with a short position must pay the dividend to the company as opposed to receiving it, according to federal rules. That may encourage them to clear out.
Rocket's surge reflects the GameStop rally last month when Reddit retail investors pushed the Texas-based retailer's shares up 1,500% in two weeks.