GameStop short-sellers have lost $1.9 billion in just 2 days amid the stock’s latest spike

GameStop
  • Short sellers lost $664 million on Wednesday as GameStop shares spiked 104% in the final 30 minutes of trading, S3 Partners said.
  • The stock’s 84% intraday gain on Thursday fueled another $1.19 billion in mark-to-market losses.
  • Reddit traders revived the GameStop rally this week on new hopes the company can reinvent itself.
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Nearly one month after GameStop’s leap to record highs, Reddit traders are boosting the meme stock all over again. And just like in the January rally, short-sellers are hurting big.

Investors selling GameStop short – betting the stock price would decline – posted $664 million in mark-to-market losses as shares of the gaming retailer rocketed 104% into the close, according to financial analytics firm S3 Partners. The stock’s 84% intraday gain fueled another $1.19 billion in losses, bringing the two-day total to more than $1.85 billion.

To be sure, the losses pale in comparison to those fueled by the January surge. GameStop shorts are down $10.75 billion year-to-date on their bearish bets, according to S3. The sum includes Thursday’s intraday rally.

GameStop first spiked higher last month as day traders uniting in online forums like the Wall Street Bets subreddit scooped up shares in hopes of driving a massive short squeeze. Such a technique involves driving shares high enough to force short-sellers to cover their own positions by buying the stock. Short-seller purchases further lift prices and form an upward spiral for the stock.

The Reddit-trader phenomenon faded through February as widespread selling pulled shares from their extremely elevated levels. Yet a last-minute rally on Wednesday reignited the buying frenzy and prompted new calls on Wall Street Bets to drive a new short squeeze.

It’s unlikely such a squeeze prompted the stock’s latest tear, Ihor Dusaniwsky, managing director of predictive analytics at S3, told Insider in an email.

“While there were some buy-to-covers brought about by the large mark-to-market losses, they were offset by new short sellers looking for a pullback from this volatile price move,” he said.

The shorts are holding their ground, too. The number of GameStop shares shorted over the past week rose by 1.97 million, marking an increase of 15%.

Short interest in the stock is $1.42 billion, or 28.4% of the company’s tradeable shares. While still a large sum, that’s down significantly from the nearly 140% short interest seen earlier in 2021.

The number of shares sold short can decline even further if GameStop’s stock price holds, Dusaniwsky said. Losses are already big enough to concern bearish investors, and another rally could be what breaks their resolve, he added. 

“Many shorts are teetering on the edge of being squeezed out and a move back towards January’s high will certainly push many more shorts over the cliff,” Dusaniwsky said.

GameStop traded at $148.47 as of 3 p.m. ET Thursday, up 660% year-to-date.

Read more: GOLDMAN SACHS: These 40 heavily shorted stocks could be the next GameStop if retail traders target them – and the group has already nearly doubled over the past 3 months

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Famed Reddit trader Keith Gill has piled more money into his GameStop investment

Keith Gill Reddit Wall Street Bets Deep Effing Value Washington.JPG
Keith Gill, an individual online investor in GameStop, testifies during an entirely virtual hearing of the House of Representatives Committee on Financial Services entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide?”

  • Keith Gill has put his money where his mouth is and purchased more shares of GameStop, according to a screenshot posted to Reddit.
  • Gill bought 50,000 shares of the video-game retailer, bringing his total common stock stake to 100,000 shares.
  • Gill explained his bullish case for GameStop stock in his testimony to Congress last week.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Famed Reddit trader Keith Gill has increased his stake in GameStop, according to a screenshot he posted to Reddit on Friday.

Gill, who goes by Roaring Kitty on YouTube and Twitter and DeepF—ingValue on Reddit, now owns 100,000 shares of the video-game retailer, representing a double of his previous common share stake of 50,000 shares. Gill also owns call options on the stock, worth about $1.5 million as of Friday. 

In total, Gill’s current stake in GameStop, between his stock and call options, is worth about $5.5 million. Gill has already realized profits in his GameStop investment of more than $10 million. 

Gill initially invested in GameStop in June 2019, when shares were trading below $10. Last month, the stock topped out at $483 after an epic short-squeeze was sparked by members of Reddit’s WallStreetBets forum. Gill’s initial $50,000 investment in GameStop was briefly worth $48 million amid the short-squeeze frenzy last month.

Gill testified to Congress last week and explained his bullish thesis on GameStop, which is predicated on a potential turnaround in the retailer, a shift to e-commerce sales, and the renewed video game console sales cycle from Sony and Microsoft.

Shares of GameStop traded up as much as 20% on Monday.

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Reddit day traders wanted to beat Wall Street to prove the system is rigged. Instead, they did it by losing.

A group of demonstrators are gathered by the New York Stock Exchange
A group of demonstrators are gathered by the New York Stock Exchange

  • Reddit day traders tried to beat Wall Street at its own game to prove that the system is rigged.
  • Instead, brokerages locked them out and their holdings tanked, while some hedge funds still won big.
  • Experts said Wall Street’s reaction showed just how stacked the deck is against small investors.
  • Visit the Business section of Insider for more stories.

Keith Gill, the day trader and member of Reddit group WallStreetBets who is widely credited with igniting the recent GameStop trading frenzy, claimed in late January that he had turned his $54,000 investment into a $48 million dollar fortune.

Days later, it had been sliced by more than half to $22 million, and regulators had set their sights on Gill, investigating him over potential disclosure violations.

Many retail investors fared far worse. One Robinhood user lost $70,000 in savings and contemplated committing suicide. Another, Alexander Kearns, did.

GameStop’s stock, which had peaked at more than $480, had dropped to around $52 as of Friday.

Before the rollercoaster went off the rails, however, one hedge fund walked away with a $700 million profit, brokerage app Robinhood raised billions in new financing after being forced to restrict its users from buying stocks, and trading giant Citadel likely made a hefty sum from the increased market volatility.

While the dust has far from settled, and some Wall Street firms did lose big, a David versus Goliath victory now hardly seems like the most likely outcome. 

It had made for a compelling narrative, too: an army of retail investors – without deep pockets, sophisticated trading algorithms, proprietary market data, or other tools of the trade – banding together to beat powerful, corrupt financial institutions at their own game.

Ultimately though, Wall Street and other big-money investors still appear to have ended up on top, and experts, at least those outside the industry, say it’s that outcome that further proves how the system is rigged.

Insider spoke with three experts on financial markets – none of whom work at traditional financial services firms. They said there’s a lot of work to be done to make the markets work for small investors again, and, just as importantly, to restore the public’s faith that the markets can do just that.

“Geared to favor the big”

“The whole business is basically a power dynamic… it’s geared to favor the big over the small,” Garphil Julien, a research associate with the anti-monopoly think tank Open Markets Institute, told Insider. “Those with enormous amounts of capital, enormous amounts of money, will use their power to basically get what they want, and when they get what they want, someone else is going to lose,” he said.

He’s not alone in that assessment.

According to a recent CNBC poll, a record-breaking 57% of Americans view the stock market as a reflection only of how corporations and the wealthy are doing, not the rest of the country. That’s true among financial elites and Republicans as well, both historic defenders of the free markets.

“Is the market really fair for individual investors? Is it really competitive? What we’re seeing is that it’s not,” Julien said.

As former Wall Street analyst Alexis Goldstein recently put it in an op-ed for The New York Times: “Wall Street’s edge over retail traders remains, as always, structural,” and even if a bunch of Redditors band together, “the house still wins.” But, she argued, “rather than gambling on the dubious promise of more Americans gaining access to the casino, it’s time to rewrite the rules to ensure that the house doesn’t always win.”

Julien said that means adding more consumer protections, as well as cracking down on the monopolization of various segments of the financial services industry. For example, he pointed to brokerage apps, like the Morgan Stanley-owned E*TRADE and TD Ameritrade, which is owned by Charles Schwab.

Making money by “making money”

Another problem underlying the GameStop saga is that too many Wall Street firms have gotten into businesses that are inherently designed to extract as much money as possible from the financial system for their own gain, rather than helping allocate it toward uses that would help the economy overall.

Amid last month’s trading frenzy, the markets ultimately proved fairly resilient, but that doesn’t mean they’re working in ways that protect smaller investors who have more to lose.

“There will be a temptation to say… the market isn’t broken, everything’s fine,” Barbara Roper, director of investor protection at the Consumer Federation of America, told Insider. “While it’s true that the market isn’t broken – yet – I don’t think it follows that everything is fine.”

Roper said it’s good to focus on improving transparency and accountability around practices that may involve conflicts of interest, such as payment for order flow, over which Robinhood and Citadel are both facing scrutiny, but that the issue is also far more fundamental and widespread.

Read more: Robinhood makes hundreds of millions from selling customer orders. That business model is about to come into focus.

“The financial services industry itself has sort of divorced itself from the more boring and less profitable job of helping to steer capital toward its best uses in support of the productive economy, and has for some time now, made most of its money making money,” Roper said.

“Financial firms make all of their money off of securitizing everything under the sun,” she said. “They found a way that it’s really profitable, and so they’re pursuing the profits even though the niche is overfilled.”

But that problem “was at the heart of the last financial crisis, and we didn’t solve it there,” Roper said, referring to the 2008 financial crisis.

Since then, there have been multiple near-crises and the problems have only gotten worse.

Robinhood itself has been criticized – and fined $65 million by the Securities and Exchange Commission – over high-frequency trading, a controversial practice that uses powerful software to execute large trades in fractions of a second, allowing firms to make money off momentary changes in the price of stocks. Wall Street banks are even evading regulations around derivatives trading – the same risky behavior that precipitated the 2008 crisis – according to financial blog Wall Street On Parade.

Roper said she doesn’t see dangerous Wall Street business models being addressed anytime soon, either.

“If we didn’t do it when Wall Street literally brought the global economy to the brink of collapse, I don’t think we’re going to do it now because some people on Reddit put on a short squeeze and caused some chaos in the markets for a few weeks,” she said. “I guess I’m as cynical as the people on WallStreetBets.”

“Broader public outrage”

Part of Americans’ frustration with the current financial system is that it has become so complex that only Wall Street insiders really seem to know how everything works, something the industry uses to its advantage to dodge blame in situations like GameStop.

“It’s another episode similar to those past ones of the public feeling like there are multiple things wrong here – not really know what is exactly wrong, but just feeling like something is not working,” Graham Steele, senior fellow at the American Economic Liberties Project, told Insider.

“It’s just a general popular sense that a system wherein this kind of scenario can come to pass, just fundamentally doesn’t work for the public and it is ‘rigged,’ or something else, but they know something is wrong.”

Steele also said widening inequality, pandemic response failures, and polarization around the election amplified the GameStop fury: “It feels like you’re layering a new financial episode on top of other, broader public outrage.”

That’s also apparent in the voices from across the political spectrum that have criticized Wall Street in recent weeks: progressive Democrats like Rep. Alexandria Ocasio-Cortez and Sen. Elizabeth Warren; far-right Republicans like Sen. Ted Cruz; and tech investors like Elon Musk and Mark Cuban.

But that’s where their agreement ends, with Democrats typically favoring government intervention, and Republicans typically pushing for more transparency and then letting the markets figure out the rest.

“In terms of the Silicon Valley folks,” Steele said, they’re “painting themselves as kind of populists, but a lot of them have their own sort of financial interests at stake here. A lot of their solutions are like, don’t use that app, use the app that I invested in.”

“I just don’t see Elizabeth Warren going out there pumping someone else’s trading app because a venture capitalist has said, ‘that’s the right thing to do,'” he added.

Elon Musk, for example, has spent the past few weeks hyping up cryptocurrencies like Dogecoin.

Ultimately, all three experts agreed that making the markets more equitable and aligned with the health of the broader economy will require reforms stretching far beyond the financial services industry.

“Fixing that system requires a whole host of policy solutions that run the gamut from financial regulation to tax policy to how we structure the retirement system to how we deliver healthcare to people,” Steele said.

Read more: The SEC is monitoring the GameStop trading frenzy. Here’s why lawyers and former regulators say clamping down on the market will be tough.

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Robinhood protesters threw dog feces and vandalized statue at the company’s headquarters over GameStop fiasco

GettyImages 1299843912 MENLO PARK, CALIFORNIA - FEBRUARY 01: A sign reading "Robbinghood Fraud" hangs on a pole in front of the headquarters for trading app Robinhood on February 01, 2021 in Menlo Park, California. Robinhood announced on Monday that it has raised $3.4 billion amid a trading frenzy in the past week. (Photo by Justin Sullivan/Getty Images)
A sign hung by protesters at Robinhood’s Menlo Park, California, headquarters on February 1, 2021.

A handful of protesters outraged at trading app Robinhood have shown up in recent weeks at its headquarters in Menlo Park, California, to voice frustrations over the company’s decision to limit trading of certain stocks.

Some of those protesters, however, used more than their words.

Robinhood’s security staff said in calls to the Menlo Park Police Department that one protester threw dog feces at the building, one hurled his T-shirt at a guard, and another sawed through a statue on the property, an MPPD spokesperson told Insider.

The feces thrower fled before he could be identified, while the t-shirt hurler was cited for assault and released – both incidents occured on January 28, the spokesperson said, adding that later that night, Robinhood security staff called police again to report two trespassers, who left after warnings from MPPD officers.

Robinhood declined to comment.

Those incidents, reported earlier by CNBC and confirmed by Insider, were followed by a roughly 15-person demonstration on January 29 that did not result in any police response, according to MPPD.

On January 31, another protester vandalized a statue, apparently using an electric saw, and on February 2, a 20- or 30-year-old man showed up and yelled at security staff but left before officers arrived, the MPPD spokesperson said.

Protesters also wrote “VLAD SUCKS” – referring to Robinhood CEO Vlad Tenev – in chalk on the sidewalk in front of Robinhood’s offices, according to images captured by Getty photographer Justin Sullivan on February 1.

GettyImages 1299843894 MENLO PARK, CALIFORNIA - FEBRUARY 01: A chalk drawing referencing Vladimir Tenev, the co-founder of trading app Robinhood, is visible on the sidewalk in front of the company's headquarters on February 01, 2021 in Menlo Park, California. Robinhood announced on Monday that it has raised $3.4 billion amid a trading frenzy in the past week. (Photo by Justin Sullivan/Getty Images)
A chalk drawing referencing Vlad Tenev, Robinhood CEO and co-founder, in front of the company’s offices in Menlo Park, California, on February 1, 2021.

Robinhood and other trading apps sparked the anger of customers last month after they restricted them from trading GameStop, AMC Entertainment, Nokia, and other stocks amid a short-squeeze fueled by Reddit day traders – many of whom use Robinhood to make those trades.

Customers complained the trading apps had locked them out of massive potential gains by preventing them from buying stocks or options as share values climbed – while hedge funds and other large investors were free to keep trading. They also argued that Robinhood’s business model, which depends heavily on a controversial practice known as “payment for order flow,” presents a conflict of interest that may have led Robinhood to limit trading to protect the large firms that pay it to execute users’ trades.

Read more: Robinhood makes hundreds of millions from selling customer orders. That business model is about to come into focus.

Robinhood and Tenev have defended the restrictions, saying it was necessary to curb trading volumes in order to meet regulatory requirements.

Still, the moves prompted backlash in the form of class-action lawsuits and Congressional hearings. At the same time, federal regulators and prosecutors are investigating whether the army of Reddit traders engaged in market manipulation.

Read more: Robinhood has been beefing up its legal firepower with these 15 lawyers as suits pile up

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Goldman Sachs: Biggest ‘short squeeze’ in 25 years caused hedge funds to ‘de-gross’ at fastest rate since 2009

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Goldman Sachs said the GameStop saga had hit the wider market, with hedge funds rapidly cutting their positions

The US stock market is witnessing the biggest “short squeeze” in 25 years, forcing hedge funds to withdraw from their positions on stocks at the fastest rate since 2009, according to Goldman Sachs.

Last month saw GameStop shares rise more than 1,700%, “squeezing” hedge funds and others who had “shorted” the stock, costing them billions of dollars. A short position is a bet that a share price will fall.

The surge in GameStop and other heavily shorted stocks was driven by users of the Reddit forum Wall Street Bets, who forced up the price in an effort to make themselves money but also to hammer hedge funds such as Melvin Capital.

Read More: A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street – and shares her 4-part advice for navigating the frenzied trading environment

Goldman Sachs analysts this weekend shed some light on the situation in a note. “The past 25 years have witnessed a number of sharp short squeezes in the US equity market, but none as extreme as has occurred recently,” they said.

The equity analysts said a basket of the most-shorted US stocks has rallied 98% in the last three months. Estimates by data provider Ortex on Friday showed that short-sellers were sitting on losses of around $19 billion just on GameStop in 2021 so far.

Hedge funds and short-sellers who had made losing bets were forced to withdraw from the market rapidly at the fastest pace since 2009, in what is known as “de-grossing”.

They had to buy shares in companies such as GameStop and movie theater chain AMC to close their short positions, and sell other stocks to cover their losses.

“This week represented the largest active hedge fund de-grossing since February 2009,” Goldman analysts including David Kostin and Ben Snider said. “Funds in their coverage sold long positions and covered shorts in every sector.”

Kostin and his colleagues said regulations, limits put in place by trading platforms, or sharp losses could bring the amateur trading frenzy to a halt.

“Otherwise, an abundance of US household cash should continue to fuel the trading boom,” they said.

Read More: As Redditors flood the stock market, UBS breaks down 6 options strategies investors can use right now to protect their portfolios 

Goldman said retail investing was thriving because of the large amount of savings built up during the coronavirus period, as well as government stimulus.

“During 2020 credit card debt declined by more than 10%, checking deposits grew by $4 trillion, and savings grew by $5 trillion,” the investment bank’s analysts said.

“On top of these savings, our economists expect more than $1 trillion in additional fiscal support in coming months, including another round of direct checks.”

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Short-sellers are nursing estimated losses of $19 billion in 2021 after betting on GameStop’s share price to fall

gamestop store

Hedge funds and other institutions shorting GameStop stock were sitting on losses of about $19 billion as of Friday, new data shared exclusively with Insider indicates.

Figures from the data provider Ortex suggested that investors who had bet that the share price would fall had been massively squeezed, with losses topping $10 billion on Wednesday alone, when GameStop soared 135%.

Members of the Reddit forum Wall Street Bets have gone to war with hedge funds such as Melvin Capital this week over the US video-game retailer.

Forum members banded together to help drive up GameStop stock by more than 1,500% over the past month, with seemingly little business basis.

The rise has dramatically “squeezed” investors who were betting that the price would fall. As the price has soared, short-sellers have been forced to “cover” their positions by buying back stock at a huge loss.

“The long and the short of it hedge funds are hurting,” said Eleanor Creagh, a market strategist at Saxo Bank, adding that “the problem from here” is “whether the initial bout of deleveraging causes a chain reaction of squeezed positioning.”

When the GameStop stock price soared on Wednesday, investors’ losses on paper rose by about $10.2 billion, Ortex’s data showed. But as the price tumbled on Thursday, short-sellers regained some ground, with estimated gains of $5.95 billion.

Read more: MORGAN STANLEY: Buy these 17 stocks with strong earnings that are expected to outperform into 2022 even if the broader market sinks

Overall, Ortex estimated that short-sellers were on track for losses of about $19.04 billion as of Friday, with GameStop’s share price up by 78%, to about $345, just before 11 a.m. ET.

The losses haven’t been realized – they’re estimates based on data provided by lenders, brokers, and dealers. But they give a sense of the scale of the hit to hedge funds and other short-sellers.

Melvin Capital and Citron Research both said this week that they had closed their short positions, but they did not disclose any losses incurred.

Ortex estimated that the number of GameStop shares being shorted had fallen from about 79,000 on January 13 to fewer than 39,000 as of Thursday.

Steve Cohen’s $19 billion hedge fund, Point72, has lost nearly 15% this year during the GameStop frenzy, a source told The New York Times. And Bloomberg reported that $20 billion D1 Capital Partners had lost about 20% in January.

Data from Ortex released on Thursday indicated that short-sellers were sitting on losses of about $70 billion because of their overall short positions on US firms so far this month.

Read more: Billionaire investor Mario Gabelli started investing when Eisenhower was president. He told us how he leverages almost 5 decades of experience to identify winning stocks – and shared 5 of his favorite picks.

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Robinhood users are furious that it intervened in GameStop trading. This map reveals where they are.

GettyImages 1230845061 NEW YORK, USA - JANUARY 28: A group of demonstrators are gathered by the New York Stock Exchange building (NYSE) to protest Robinhood and bring their voices to Wall Street trades amid GameStop stock chaos in New York City, United States on January 28, 2021. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images)
Protesters demonstrated at the New York Stock Exchange on Thursday to protest Robinhood and establishment Wall Street firms amid the GameStop stock chaos.

  • Robinhood users are furious after it blocked them from trading GameStop and other red-hot stocks.
  • In more than 120,000 tweets in just two days, users called for a boycott of the app.
  • This map, compiled by cryptocurrency news site Bitreporter, reveals where they are.
  • Visit Business Insider’s homepage for more stories.

Robinhood sparked the outrage of its users this week after it throttled their ability to buy shares of GameStop and other red-hot stocks amid a market frenzy.

Bitreporter, an online cryptocurrency and financial news website, mapped out that anger using geotagged Twitter data, and unearthed more than 120,000 tweets over the past two days from users venting about the situation via hashtags like #boycottrobinhood, #deleterobinhood, and #cancelrobinhood.

The map revealed some interesting trends about who’s behind this week’s wild stock market activity – here’s which states’ Twitter users were the angriest about Robinhood.

boycott robinhood
Twitter users voiced outrage over Robinhood in more than 120,000 tweets in just 48 hours.

New York, as well as other large states and those near the financial heart of America, such as Pennsylvania, were unsurprisingly, well-represented – but so were less-populated states like West Virginia, Utah, South Carolina, Hawai’i, and Wyoming.

“Another piece of the puzzle is the somewhat populist undertones of all this,” Bitreporter spokesperson Ryan Taylor told Insider. “The little guy taking on the ‘man’ type idea.”

“This is a popular theme in states like Florida, West Virginia, and South Carolina, especially in recent years. And when these people feel that they are being taken advantage of, or cheated, they are going to make it known they aren’t happy,” he said.

States where gambling is big, like Nevada and New Jersey, also saw a lot of activity.

“While Nevada is the top gambling state, it could be argued that New Jersey is the top ‘online’ betting state,” Taylor said, “so it’s no surprise that you see these states jumping on an app like Robinhood and engaging in what some would say is ‘gambling.'”

Taylor said the only surprise was that “there didn’t seem to be a lot of Robinhood outrage in California,” adding that, while it’s difficult to get exact location information Twitter users, “you would assume California has the greatest amount of Robinhood users.”

Read more: The Reddit traders driving up the price of GameStop are not what you think they are

Earlier this month, a Reddit-based online community of investors called r/WallStreetBets ignited a “short squeeze,” a buying spree that targeted GameStop, AMC Theaters, Nokia, and a handful of other stocks, sending their prices skyrocketing.

In the process, they also triggered massive losses for Wall Street short sellers who had bet those stocks would tank, and fueled a surge in market volatility this week as other investors rushed to get in on the action.

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital’s short positions

On Thursday, Robinhood, which allows anyone to buy and sell stocks without fees, briefly blocked users from buying GameStop and other stocks targeted by the short squeeze. On Friday, the company capped users at one share of GameStop and restricted trading for 22 other shares.

The move drew swift criticism from Robinhood’s users – as well as business leaders and some Democratic politicians – who claimed Robinhood was unfairly blocking retail investors from buying stocks that were still on their way up even as hedge funds and other Wall Street firms could still trade freely.

Robinhood CEO Vlad Tenev defended the move, saying the company had to comply with regulations that became more stringent due to the market volatility.

But Robinhood users didn’t buy it, and voiced their anger by tanking the app’s reviews, filing lawsuits, and venting on social media.

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Short-sellers are nursing estimated losses of $19 billion in 2021 after betting GameStop’s share price would fall

gamestop store

Hedge funds and other institutions shorting GameStop stock were sitting on losses of about $19 billion as of Friday, new data shared exclusively with Insider indicates.

Figures from the data provider Ortex suggested that investors who had bet that the share price would fall had been massively squeezed, with losses topping $10 billion on Wednesday alone, when GameStop soared 135%.

Members of the Reddit forum Wall Street Bets have gone to war with hedge funds such as Melvin Capital this week over the US video-game retailer.

Forum members banded together to help drive up GameStop stock by more than 1,500% over the past month, with seemingly little business basis.

The rise has dramatically “squeezed” investors who were betting that the price would fall. As the price has soared, short-sellers have been forced to “cover” their positions by buying back stock at a huge loss.

“The long and the short of it hedge funds are hurting,” said Eleanor Creagh, a market strategist at Saxo Bank, adding that “the problem from here” is “whether the initial bout of deleveraging causes a chain reaction of squeezed positioning.”

When the GameStop stock price soared on Wednesday, investors’ losses on paper rose by about $10.2 billion, Ortex’s data showed. But as the price tumbled on Thursday, short-sellers regained some ground, with estimated gains of $5.95 billion.

Read more: MORGAN STANLEY: Buy these 17 stocks with strong earnings that are expected to outperform into 2022 even if the broader market sinks

Overall, Ortex estimated that short-sellers were on track for losses of about $19.04 billion as of Friday, with GameStop’s share price up by 78%, to about $345, just before 11 a.m. ET.

The losses haven’t been realized – they’re estimates based on data provided by lenders, brokers, and dealers. But they give a sense of the scale of the hit to hedge funds and other short-sellers.

Melvin Capital and Citron Research both said this week that they had closed their short positions, but they did not disclose any losses incurred.

Ortex estimated that the number of GameStop shares being shorted had fallen from about 79,000 on January 13 to fewer than 39,000 as of Thursday.

Steve Cohen’s $19 billion hedge fund, Point72, has lost nearly 15% this year during the GameStop frenzy, a source told The New York Times. And Bloomberg reported that $20 billion D1 Capital Partners had lost about 20% in January.

Data from Ortex released on Thursday indicated that short-sellers were sitting on losses of about $70 billion because of their overall short positions on US firms so far this month.

Read more: Billionaire investor Mario Gabelli started investing when Eisenhower was president. He told us how he leverages almost 5 decades of experience to identify winning stocks – and shared 5 of his favorite picks.

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Robinhood is reportedly borrowing at least ‘several hundred million dollars’ from banks amid GameStop trading frenzy

robinhood gamification trading app 4x3
  • Robinhood is drawing on credit lines from its lenders, Bloomberg reported Thursday.
  • The trading app is tapping into “at least several hundred million dollars,” according to Bloomberg.
  • Robinhood is popular among the retail investors behind this week’s market frenzy involving GameStop.
  • Visit Business Insider’s homepage for more stories.

Robinhood is drawing down lines of credit to the tune of “at least several hundred million dollars,” Bloomberg reported Thursday.

The quick decision to seek additional funds from its lenders, which include JPMorgan Chase and Goldman Sachs, suggest that this week’s trading frenzy has put a strain on the company, according to Bloomberg’s Matthew Monks and Michelle Davis. 

Robinhood did not respond to a request for comment on this story.

The trading app is popular among the online community r/WallStreetBets, a group of mostly retail investors who sparked massive market swings by targeting short sellers’ positions in companies including GameStop, AMC Theaters, and Nokia.

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital’s short positions

The high volatility prompted Robinhood and other brokerage firms to temporarily halt trading of those shares.

In an email to users, Robinhood attributed the company’s decision to restrict trading to having to comply with financial requirements including SEC net capital obligations and clearinghouse deposits, that it said protected investors and the stock market. 

Read more: Robinhood user launches class-action suit against the trading app hours after it blocked purchases of GameStop

But the move sparked outrage from customers, the broader retail investor community, several progressive lawmakers including Reps. Alexandria Ocasio-Cortez and Ro Khanna, regulators, and even Elon Musk, a popular figure among r/WallStreetBets members.

Democrats in Congress have said they will hold at least two hearings about Wall Street’s practices following the GameStop short-squeeze.

Read more: One chart shows how 3 GameStop shareholders gained nearly $4 billion in a week

Robinhood has tapped its credit lines during periods of market volatility in the past. In March 2020, it maxed out its credit lines during wild market swings in the early stages of the COVID-19 pandemic. 

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