Investment fund Melvin Capital closed its “short” positions in GameStop stock after recording heavy losses due to the spike in price they recorded., According to his official, Gabe PlotkinOn the US CNBC.
In this context, according to a Business Insider post, Melvin Capital claimed that speculation about a potential bankruptcy was false.
Behind this download is a forum on the social network Reddit, R / WallStreetBets, Which has more than 2 million subscribers. Noise generated by this community spurred a revival of value, causing losses for all short-positioned investors.
In total, short-positioned funds recorded losses of nearly $ 5 billion
On Wednesday, a real army of retail investors organized via social media decided to use the company’s shares to inflict losses on traditional funds and, incidentally, to make money in the process.
GameStop stock price, which is trading on Wall Street under the symbol GME, surged more than 100% yesterdayAfter many ups and downs, as the video game retailer’s video game retailer is overshadowed by the craze of huge reviews.
The movement is capped by a 1,200% gain since the start of JanuaryR / WallStreetBets, when the stock became the focus. This corner of the Reddit social network has two million users, through operating platforms aimed at more retail investments, which are largely supported by smartphones, discussing the market to find investment strategies.
The company whose stock is at the center of the storm, a chain of stores that sells physical video games, has been punished by the pandemic and the rise of e-commerce and at the forum have already discussed investing in it., Awaiting any hint of bullish news to stimulate buying.
The rise intensified after the publication of several tweets, such as those of the CEO of Tesla, Elon Musk, As the Reddit Forum has been linked.
In total, short-position funds recorded losses of nearly $ 5 billion, including $ 917 million on Monday and $ 1,600 on Friday, according to data from S3 Partners.
“WSB is downing Wall Street on its own. Strength is for the bloody people. I am so proud of you all of the illiterate backsliders,” sums up one forum user.
WallStreetBets users have already targeted several repeat targets for what happened with GameStop, such as Nokia, BlackBerry and the American movie theater series AMC.
Melvin Capital has been marked as one of the targets within this Reddit community, but it has been very successful in the past betting on other companies.. In fact, earlier this month, Melvin Capital made more than 15 million euros by betting on CD Projekt, developer of Cyberpunk 2077, one of the most anticipated video games of the year.
Video game errors caused the Polish company to drop by more than 38% in the stock market, equivalent to about 15,000 million euros, and Sony was forced to withdraw it from its PSN service.
To carry out an operation of this type, the investor, in general, a Hedge fund Like Melvin Capital Management, you must first borrow such shares from another investor (for example, a founding fund, for which the company receives bonuses). Then they sell it in the hope that they can buy it back at a lower price and return it to the entity from which they borrowed.
Despite losses recorded at the start of the year, shares of this Polish company rose 40% from last week, according to Investing, as well as shares of other companies in which Melvin Capital had short positions: Evotec recorded gains of 35% in three days and Varta 10.4. percent.
R / WallStreetBets users have already targeted different targets to replicate what happened with GameStop, such as Nokia (+ 33% since the start of the year), BlackBerry (+ 225%), or the American cinema chain AMC (+ 716%), which shined in the biggest climb on the day Wednesday.
I kept reading:
Trolls vs. Wall Street: How an Army of Social Media Users Hit Stocks and Lose Millions for Big Money
Wall Street: 10 Stocks Ready for a Stunning GameStop Rally
Short squeeze: What was the maneuver of small investors that caused heavy losses for Wall Street funds
