XL Fleet slumps 20% as famed investor Carson Block goes short, says the market is in a SPAC bubble full of ‘garbage’

Carson Block
Carson Block, founding partner of Muddy Waters Research LLC, speaks on a panel discussion at the annual Skybridge Alternatives Conference (SALT) in Las Vegas May 10, 2013.

  • Shares of XL Fleet tumbled as much as 20% on Wednesday as Carson Block of Muddy Waters Research revealed he was short the company.
  • Block said that conversations with former XL Fleet employees revealed “a collection of exaggerations, half-truths, and mistruths.”
  • “This is a SPAC bubble, where all kinds of garbage is being foisted on the public markets and that XL is middle of the fairway SPAC garbage,” Block said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

XL Fleet fell as much as 20% on Wednesday as short-seller Carson Block of Muddy Waters Research revealed he was short the hybrid-truck company.

In a report released on Wednesday, Block alleged that XL Fleet is misleading investors with an inflated sales backlog. Much of Block’s research was based off of conversations with former employees of the company.

XL Fleet transforms gas-powered vehicles into hybrids, and it went public late last year via a reverse merger with a SPAC at a valuation of about $1 billion. But Block thinks shares are overvalued based off of its Series D financing that valued the company at around $73 million. The company currently trades at a valuation of about $2 billion.

“I can’t believe they’re a public traded company. I’m literally dumbfounded that this actually happened,” a former XL Fleet employee told Block.

Since hitting an all-time-high of $35 shortly after it completed its SPAC merger in late December, shares of XL Fleet have plummeted as much as 63%.

And Block isn’t constructive on SPACs broadly as they continue to flood the market, according to an interview with Zer0es.tv seen by Insider.

“This is a SPAC bubble, where all kinds of garbage is being foisted on the public markets and that XL – at least in our view – middle of the fairway SPAC garbage,” Block said.

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SIGN UP HERE FOR OUR TUESDAY EVENT: A conversation with Insider’s markets gurus on the GameStop and Reddit-trader phenomenon

Gamestop.
Gamestop.

Stock markets around the world are reeling from Reddit traders’ volatile trading over the past week. How the speculative activity continues could determine whether the trend pops with little lasting impact or sparks a new discussion over economic equality.

What began as an effort to profit from a short squeeze has since exploded into a national debate on market access. Retail traders coordinating on Reddit forums like r/wallstreetbets lifted GameStop, AMC, and other highly shorted stocks, hoping to profit as funds covered their short positions.

The group ultimately beat Wall Street at its own game. Their trades drove billions of dollars in losses across short-selling hedge funds and left Wall Street’s old guard reeling.

Actions taken Thursday by several brokerages further stoked the day-trader movement. Robinhood, Interactive Brokers, and others restricted trading of the volatile stocks, arguing the moves protected them and their clients from outsize risk. Congress is now set to hold hearings on the matter as members allege the trading platforms stifled the individual investor for the benefit of the Wall Street establishment.  

Join us Tuesday, February 2, 2021 at 1:00 p.m ET as deputy editor Joe Ciolli and markets and economy reporter Ben Winck discuss the GameStop phenomenon, Wall Street Bets’ influence, and how the Reddit-fueled trade might end.

You can sign up here.

Read the original article on Business Insider

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.

Read the original article on Business Insider

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.

Read the original article on Business Insider

SIGN UP HERE: A conversation with Insider’s markets gurus on the GameStop and Reddit-trader phenomenon

Gamestop.
Gamestop.

Stock markets around the world are reeling from Reddit traders’ volatile trading over the past week. How the speculative activity continues could determine whether the trend pops with little lasting impact or sparks a new discussion over economic equality.

What began as an effort to profit from a short squeeze has since exploded into a national debate on market access. Retail traders coordinating on Reddit forums like r/wallstreetbets lifted GameStop, AMC, and other highly shorted stocks, hoping to profit as funds covered their short positions.

The group ultimately beat Wall Street at its own game. Their trades drove billions of dollars in losses across short-selling hedge funds and left Wall Street’s old guard reeling.

Actions taken Thursday by several brokerages further stoked the day-trader movement. Robinhood, Interactive Brokers, and others restricted trading of the volatile stocks, arguing the moves protected them and their clients from outsize risk. Congress is now set to hold hearings on the matter as members allege the trading platforms stifled the individual investor for the benefit of the Wall Street establishment.  

Join us Tuesday, February 2, 2021 at 1:00 p.m ET as deputy editor Joe Ciolli and markets and economy reporter Ben Winck discuss the GameStop phenomenon, Wall Street Bets’ influence, and how the Reddit-fueled trade might end.

You can sign up here.

Read the original article on Business Insider