The dizzying surge in shares in beleaguered video game store GameStop is bringing in new millionaires and costing hedge funds billions of dollars – at least on paper.
GameStop shares rose another 70 percent on Friday in a dizzying rally driven by small investors on the online forum Reddit, which has seen 1,800 shares soar since early January.
The army of petty traders buying up the stock promises to hold on to their shares to force hedge funds who have bet against them to pay up the nose to cover their losses – meaning many of the new fortunes will be wiped out if and when the bubble bursts.
But for now, Robinhood merchants like AJ Vanover, who makes about $ 35,000 a year from selling auto parts in Missouri, are in the money. Vanover’s Robinhood balance is more than $ 1 million, according to screenshots he shared with CNN.
Keith Gill, the YouTuber, otherwise known as ‘Roaring Kitty’, was one of the leaders in the GameStop uprising, promoting the potential for a brief press on his YouTube channel
On Friday, Gill shared a screenshot of his trading account showing that he is up $ 31.5 million on a $ 755,000 investment he made in GameStop stock and call options in July.
Van over, like many others, has yet to cash in money and his winnings can still be erased. But if he gets on the winning side of the trade, he hopes to help his parents with their mortgage and keep investing.
Vanover was off from work this week, quarantined after a colleague contracted COVID-19, but now thinks he will not return to his old job.
“I know I will give a two-week notice,” he told CNN with a laugh. “So I’ll be nice about it.”
Keith Gill, the YouTuber, also known as ‘Roaring Kitty’, was one of the leaders in the GameStop uprising, promoting the potential for a brief press on the Reddit forum WallStreetBets, where users exchange stock tips and opinions.
On Friday, Gill shared a screenshot of his trading account showing that he was up $ 31.5 million on a $ 755,000 investment he made in GameStop in July.
“I thought this trade would be successful,” he told the Wall Street Journal, “but I never expected what happened in the past week.”
He said he wanted to continue his ‘Roaring Kitty’ YouTube channel and buy a house. He also dreams of building an indoor track facility or field house in Brockton, Massachusetts, his hometown.
The biggest winners of the prize action are GameStop’s major and long-term shareholders.
GameStop’s largest individual shareholder, Ryan Cohen, saw his 13% stake increase in value by more than $ 2 billion in the past two weeks, or more than $ 6 million per hour
GameStop investor Donald Foss (left), the former CEO of a subprime auto loan, has seen his 5 percent stake in GameStop grow by approximately $ 800 million, and GameStop CEO George Sherman’s stake (right) is 3.4 percent. about $ 500 million
GameStop’s largest individual shareholder, Ryan Cohen, saw his 13 percent stake increase in value by more than $ 2 billion in the past two weeks. Online pet store co-founder Chewy, who joined GameStop’s board this month, originally paid about $ 76 million for the stake and has seen his net worth increase by about $ 6 million per hour over the past two weeks.
Meanwhile, investor Donald Foss, the former CEO of a subprime auto loan, has seen its 5 percent stake increase by approximately $ 800 million, and GameStop CEO George Sherman’s 3.4 percent stake is up approximately $ 500 million.
In addition to individual stakeholders, BlackRock, the world’s largest asset manager, could have made a profit of approximately $ 2.4 billion on its investment in GameStop.
The asset manager owned approximately 9.2 million shares, or an interest of approximately 13 percent, in GameStop on December 31, 2020, a legal filing revealed Tuesday.
If BlackRock’s position remains unchanged, the value of its stake would now be worth $ 2.6 billion, compared to $ 173.6 million in December.
Hedge funds face billions in potential losses against bets against GameStop
At the losing end of the recent price action, a number of hedge funds, which had heavily shorted GameStop stocks, were betting that the stock price would fall.
Short selling is a way of making money on a stock when the stock price falls, and GameStop was one of the most short stocks in the market when the Reddit group took aim.
As of Friday, investors betting against GameStop have lost about $ 19 billion, with damage amounting to $ 10 billion on Wednesday alone, as GameStop shares rose 135 percent, according to data from Ortex provided to Business Insider.
Hedge funds Citron and Melvin Capital said on Wednesday that they closed their short positions after taking undisclosed losses.
Citron Research founder Andrew Left – once dubbed the ‘Bounty Hunter of Wall Street’ and one of the main investors to bet against GameStop – said Friday morning that he would no longer publish ‘short reports’ and would instead focus on opportunities for ‘long’ investments, a term to bet that a company’s stock will rise.
The infamous activist short-seller has claimed he pulled the plug on his bets against GameStop after a 100 percent loss when the stock surged this week.
Melvin Capital, the $ 12.5 billion hedge fund founded by Gabriel Plotkin, was one of the main targets of the Reddit campaign, after an SEC filing revealed that the fund had a large short position in GameStop.
New York Mets owner Steve Cohen was also exposed to the turbulent situation after his Point72 Asset Management helped save Melvin Capital
New York Mets owner Steve Cohen also had exposure to the turbulent situation after his Point72 Asset Management partnered with Ken Griffin’s firm Citadel to inject Melvin Monday with a combined $ 2.75 billion bailout to the struggling fund to assist.
In response to a concerned Mets fan on Twitter who asked if the GameStop situation would affect the team’s payroll, Cohen wrote, “Why would one have anything to do with the other.”
Maplelane Capital LLC, a New York-based hedge fund that started the year with about $ 3.5 billion, was down about 30 percent for the year through Wednesday, with its bearish GameStop stance as a major loss driver, sources said. the Wall Street Journal.