The hedge fund badly bruised by betting against GameStop is still struggling after ending the first half with a 46% loss, report says

Gabe Plotkin

Gabe Plotkin’s Melvin Capital Management, targeted by the Reddit army of day traders for its bearish GameStop bets, ended the first half of the year with a 46% loss, Bloomberg reported.

The New York-based hedge fund, which suffered a stunning 53% loss in January from the Reddit-trader short squeeze, gained 1% in June. But it is still struggling to recover, Bloomberg said in the Thursday report, citing sources familiar with the matter.

Melvin Capital, founded by star portfolio manager Plotkin, did manage to stage something of a comeback with a 22% gain in February. But its overall first-quarter loss stood at 49%, Insider understands.

The hedge fund got torched by the Reddit army alongside other high-profile firms that had big bets against GameStop when day traders banded together to send shares of the gaming retailer skyrocketing. When the price of a stock rises, short sellers must typically cover their positions by buying shares at that higher price.

Melvin Capital lost a chunk of its assets in the trading frenzy, ending January with $8 billion in assets, down from $12.5 billion at the start of the year. Its assets had risen to $11 billion as of June 1, the Financial Times and Bloomberg reported.

After the January hit, the fund has somewhat recovered. It is up 18% for the five months between February and June, Insider understands. It gained 5.4% in the second quarter.

The hedge fund is understood to be taking smaller-sized positions to limit its exposure to single companies. It exited its public short positions against GameStop, AMC and other stocks in the first quarter, but may have still held non-public, more traditional short positions.

Founder Gabe Plotkin has also asked a team of data scientists to comb through social media and day-trader forums for stock names of interest to retail traders, Bloomberg reported.

A spokesperson for Melvin Capital declined to comment.

Read More: Prominent market bear Albert Edwards warns that investors who prematurely bet on higher inflation are set up for further losses – and lays out the pathway to record-low bond yields

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A hedge fund lost 10% in just a few days after a sudden spike in AMC stock derailed an options trade, new report says

A person rides his bicycle past the closed AMC movie theaters in Times Square on October 22, 2020.
  • Hedge fund Mudrick Capital lost 10% in just a few days amid a recent surge in AMC Entertainment’s stock price, the Wall Street Journal reported.
  • The fund announced earlier this month that it purchased millions of AMC shares and sold them at a profit shortly after.
  • The fund is still up 12% year-to-date, while shares of AMC are up more than 2,000%.
  • See more stories on Insider’s business page.

Hedge fund Mudrick Capital lost 10% in just a few days of trading as shares of meme stock AMC Entertainment spiked to record highs, the Wall Street Journal reported, citing people familiar with the matter.

The losses were driven by call options sold by firm founder Jason Mudrick, according to the WSJ. The position, intended to serve as a downside hedge, ended up backfiring as the stock surged too much, too fast.

The runaway share spike occurred on June 2, when AMC shares rose as much as 127%, to $72.62, well beyond the strike price of $40 for Mudrick’s options.

Just one day prior, Mudrick had disclosed a $230.5 million purchase of new AMC stock, then immediately sold those shares at a profit, according to a Bloomberg report. Despite the success of that leg of the overall AMC trade, Mudrick’s calls on the stock were still held short, leaving them vulnerable to the June 2 surge, the WSJ found.

Mudrick did close out all options and debt positions on June 2, albeit too late to avoid the squeeze. While the fund did earn a roughly 5% return on the debt, it ended up absorbing a net loss of 5.4% because of the options trade.

Though the fund took a hit amid the surge, it’s still up about 12% for the year, the Journal said. Meanwhile, AMC, the world’s largest movie theater chain, is up more than 2,000% year-to-date.

Retail traders have been dealing blows to short sellers and hedge funds this year as they’ve poured into stocks with high short interest rates in order to force a short squeeze. Earlier this year, investors on Reddit’s Wall Street Bets led a share price surge in GameStop, which caused short sellers to lose billions.

Amid the renewed meme-stock interest in recent weeks, short sellers have continued to lose money in retail-trader favorites like AMC and GameStop. The meme stock trade has scared off many short sellers from heavily betting against certain stocks.

Read more: Goldman Sachs says these 40 popular stocks can be used to play the meme trade as surging retail volumes create huge money-making opportunities for investors who know when to get out

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Reddit traders have scared away many short sellers following massive squeezes in meme stocks, new data suggests

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  • Short sellers have shrunk their positions in heavily shorted stocks by 80% since January.
  • Short-seller losses in that period were largely limited to meme stocks over the same period, Barclays said.
  • Traders wagering on meme stocks to fail have been “burned very badly” amid the frenzy, said strategist Matt Maley.
  • See more stories on Insider’s business page.

The army of retail traders credited with squeezing GameStop and AMC short sellers earlier this year have largely pushed bears away from meme-stock names.

The tally of stocks with high short interest – a measure of wagers to the downside – has “come down dramatically” from mid-January when the GameStop craze began, a report from Barclays shows.

The number of companies for which short interest makes up 30% or more of shares outstanding has plummeted from 43 to just 18. In dollar terms, that means short sellers have shrunk their positions by 80%, from about $25 billion to just $5 billion, the data show.

The meme-stock craze has “definitely had an impact,” Matt Maley, chief market strategist for Miller Tabak, told Markets Insider, as short sellers have been “burned very badly.”

“It really disrupts a lot of strategies,” he said. “Some of these long-short strategies that have worked very well for a long time are getting thrown through a major loop because there’s no way any model says GameStop should trade at $300 something or AMC should trade at $70.

He added: “It ruins their hedges, and they’ve got to rethink some things.”

Amid the GameStop craze alone, analysts estimated short-seller losses totaled $19 billion. Melvin Capital, which took a 53% loss because of the craze, later exited all of its public short positions, though it may still hold some privately.

Renewed interest in meme stocks in recent weeks has driven more short sellers losses. On June 2 alone, a meme stock rally led by AMC caused nearly $5 billion in losses for short sellers in the top 10 shorted stocks, ORTEX data showed.

Even so, “the recent short squeeze in meme stocks over the last two weeks has also not led to material underperformance of the short interest factor baskets during this period,” Barclays said.

Short-seller losses have been largely localized to meme stocks that have generally had high short-interest rates. The data shows total short bets has remained steady since January, but the number of heavily shorted stocks has declined to less than 1% from 2.8% of the total.

“Given the low risk of a broad contagion, we view the fallout of the recent short squeeze to be limited,” Barclays said.

Bearish bets on companies with high short interest rates have been underperforming since March 2020, and the GameStop episode accelerated that, said Barclays analysts led by Maneesh Deshpande.

“The underperformance in the January 2021 episode was more acute in smaller cap names, which is where most of the high short interest was concentrated,” they said.

Small to midsize companies are the easiest targets for retailers to drive a short squeeze, as it doesn’t take as much money to move the stock, according to Maley.

“Those are the ones you can really squeeze because they’re just less liquid,” he said. But a company like General electric with a big share float, “you can’t squeeze; there’s just too much money in the stock.”

Read more: The CEO of investment-research firm Fintel shares 20 heavily shorted stocks primed for a squeeze, based on an explorer he built to help retail investors identify opportunities

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Meme stocks whipsaw as AMC share sale ends massive Reddit-fueled rally

Reddit
In this photo illustration a Reddit logo seen displayed on a smartphone.

  • Meme stocks largely retreated Thursday, with AMC, GameStop, and Bed Bath & Beyond all falling.
  • Some retail favorites, like Tilray, Clover Health, and Virgin Galactic continued to rally, though.
  • AMC dropped as much as 40% after announcing plans to sell nearly 12 million new shares.
  • See more stories on Insider’s business page.

A handful meme stocks held onto strong Thursday while others, including AMC Entertainment, GameStop, and Bed Bath & Beyond retreated.

BlackBerry led gains among meme stock Thursday before turning downward along with other well-known names. The stock, which fell as much as 8%, was the top conversation piece among retail-trader favorites on Wall Street Bets with AMC and GameStop behind it, according to data from Quiver Quantitative.

AMC, which nearly doubled in price yesterday, fell as much as 40% after the company announced a 12-million share sale. Trading halted three times for the stock amid the sharp decline.

Other meme stocks that have rallied this week fell with it. Bed Bath & Beyond dropped as much as 27% after its 63% one-day rally Wednesday. And the original meme stock, GameStop, retreated as much as 13%.

Beyond Meat, a new meme stock pushed by Mad Money’s Jim Cramer, also fell along with Koss Corp.

But not all of the retail-trader favorites declined.

Canadian cannabis companies Tilray and Sundial both rallied despite the meme-stock losses. Tilray, which recently completed its acquisition of Aphria, jumped as high as 16% Thursday, as Sundial rose 33%, putting both stocks on a two-day rally.

The two companies have benefited from positive sentiment from retail traders after Amazon announced it would back a federal bill to legalize marijuana. They were among the “most discussed” stocks on Wall Street Bets, Quiver Quantitative said.

Some other lesser-known meme stocks rallied alongside Tilray and Sundial, as well. Workhorse, the Ohio-based seller of electric vehicles and aircraft, jumped as much as 54%. Clover Health, the health insurer backed by Chamath Palihapitiya, jumped as much as 13% before paring gains, and space tourism company Virgin Galactic rose as much as 8%.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

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AMC short-sellers just lost $2.8 billion in a single day – and they’re now down $4.5 billion in 8 days amid a 500% surge for the stock

AMC Entertainment
  • AMC short-sellers lost $2.8 billion on Wednesday alone as shares skyrocketed as much as 127%
  • They’re now down $4.5 billion in just eight days, since AMC shares began a torrid surge that capped out at more than 500% on Wednesday afternoon.
  • AMC shares have benefited from renewed interest from Reddit day traders seeking to squeeze out short positions.
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Short-sellers betting against AMC stock lost $2.8 billion on Wednesday alone as shares skyrocketed as much as 127%. They’re now down $4.5 billion in just eight days, since AMC shares began a torrid surge that capped out at more than 500% on Wednesday afternoon, according to data from analytics firm Ortex.

AMC slid 3% to $60.47 on Thursday as of 9 a.m. in New York.

Short-sellers felt the pain in other meme stocks as well as Reddit day traders banded together to execute squeezes of bearish positions. Shares in home retailer Bed Bath & Beyond rallied 62%, adding up to $681 million in losses, while retail chain GameStop’s stock rose 13%, delivering $414 million in losses, according to Ortex.

It’s activity reminiscent of the GameStop mania that dominated market activity in late January and early February, and the market’s most heavily shorted stocks – including AMC – are once again in focus. Mark-to-market losses from the 10 most-shorted US stocks totaled $4.5 billion just on Wednesday, Ortex data shows.

Yet despite the deep losses, short-sellers appear relatively unperturbed. The percentage of AMC’s free float held short had actually increased to 18% on Wednesday, up from 15.5% a week prior, according to Ortex. Further, data from Bloomberg showed that shorts only slightly pared their positions on Wednesday as AMC’s wild spike was transpiring.

“If you, as an investor, believe the share price will go back to where it was at the beginning of the year, shorting the stock [now] could bring huge profits,” Ortext cofounder Peter Hillerberg told Insider.

He continued: “However, so far, the short bets haven’t paid off, as the upward momentum in AMC has been going for a few days now and seems to only be increasing.”

Read more: Morgan Stanley identifies 28 underappreciated, high-quality stocks to own as the market’s most expensive names are due to continue underperforming

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AMC launches a new program to communicate with its rabid base of day-traders – and the perks include special screenings and free popcorn

Movie patrons arrive to see a film at the AMC 16 theater in Burbank, California.
  • AMC Entertainment is launching a new program to communicate with retail investors.
  • The millions of retail investors can sign up for “AMC Investor Connect” for perks like free popcorn.
  • Retail traders sent the stock to an all-time high Wednesday despite a hedge-fund share dump.
  • See more stories on Insider’s business page.

AMC Entertainment wants to keep in touch with the army of retail traders who helped push the stock to an all-time high Wednesday.

The movie theater chain announced Wednesday it would launch a new initiative called “AMC Investor Connect,” to put the company “in direct communication with its extraordinary base of enthusiastic and passionate individual shareholders” with information and perks – like a free large popcorn at the movies this summer.

“Many of our investors have demonstrated support and confidence in AMC,” AMC Chief Executive Officer Adam Aron said in the statement. “We intend to communicate often with these investors, and from time to time provide them with special benefits at our theatres.”

AMC said the program will provide communications directly from the CEO, free or discounted items, invitations to special screenings, and “interesting information” about the company and its “place in the movie eco-system.” The company said investors worldwide can sign up but must first be an AMC Stubs member.

AMC, along with others like GameStop and BlackBerry, have become retail favorites in the new trend of meme stocks. Traders on sites like Reddit and Twitter have poured into the stock, in part to squeeze short sellers betting against the company.

As of March 11, more than 3.2 million shares, or 80% of the company’s ownership, belonged to retail investors, AMC said in the statement.

The new initiative isn’t the first time the company has reached out to retail investors. During March and May investor calls, Aron thanked the millions of retail traders who have backed the stock in recent months – sending it to all-time highs and adding $120 million to his fortune – and said he’s optimistic about the new horde of investors.

“Just go on Twitter, just go on Reddit, just go on YouTube, read what these people write. They love AMC,” Aron said on the May 6 call, according to a transcript from Seeking Alpha. “These are not people who are just going to be investors in AMC. These are going to be customers of AMC who come to our theaters and enjoy watching movies at our theaters as paying guests.”

The army of retail investors backing the stock have remained optimistic despite large backers exiting their positions. Tuesday, AMC announced an agreement for an 8.5 million-share sale to hedge fund Mudrick Capital, and hours later the fund dumped the shares at a profit.

But retail traders on sites like Reddit’s Wall Street Bets and Twitter continued sending the price higher, as the stock rallied 29% to an all-time high share price above $40 Wednesday. The hashtag #AMCARMY trended on Twitter amid the surge.

And last week, private Chinese conglomerate Dalian Wanda Group sold most of its remaining stake in the company, and retail traders cheered the new opportunity to buy up shares.

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BlackBerry jumps 10% as Reddit traders seek another short squeeze mere days after sending AMC soaring

A shareholder uses his Blackberry while waiting for the Research In Motion annual meeting to begin in Waterloo, July 17, 2007.
BlackBerry shareholder

  • BlackBerry shares rallied 10% in pre-market trading as some Redditors sought a new short squeeze.
  • The company jumped last week as well amid a broader meme-stock rally driven by retail traders.
  • Some Redditors mentioned a $20 share price target for the stock, double its current value.
  • See more stories on Insider’s business page.

Shares of BlackBerry jumped 10% in pre-market trading Tuesday as Redditors sought a short squeeze in the stock.

About a tenth of all conversations among Redditors hoped for a short squeeze, and another 1% called for a $20 price target, according to HypeEquity data. That would nearly double the share price from Friday’s close of $10.07.

Shares of BlackBerry, the legacy telecom company that is now focused on cybersecurity, rose last week as well – jumping 16.8% – amid a broader meme stock rally largely driven by retail traders.

AMC Entertainment, the world’s largest movie theater chain, led last week’s meme stock rally, more than doubling in price and closing out the week at $26.12 – its highest in years – as it trended on Twitter hashtags and among retail investors on Reddit. Other meme stocks, such as GameStop, Virgin Galactic, and a new one, Beyond Meat, also rallied last week amid renewed interest from retail traders.

Shares of AMC rose again in pre-market trading Tuesday, but some Redditors seemed ready to move onto the next short squeeze, as BlackBerry was the most popular stock stock on the site.

One Redditor, with a long post history and a lot of “karma” on the site, said, “It’s not worth buying AMC anymore, that train already passed,” and added that, “even BB is a safer choice now, since BB is actually undervalued.”

Ontario, Canada-based BlackBerry joined the meme stock trend back in January, when- in retail traders on social media sites such as Reddit picked what they deemed to be undervalued companies and poured into them in an effort to squeeze short sellers. Shares skyrocketed to $25, before declining in the following months.

Short interest in BlackBerry is 9%, according to MarketBeat data, compared to other meme stocks AMC and GameStop, which have a 21% short interest.

If you’re a Millennial or Gen Z investor willing to share your investing experience, reach out to the reporter of this article at ndailey@insider.com.

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AMC shares have doubled in just 4 days as Redditors continue to rally behind the meme stock, squeezing shorts in the process

AMC kiosks
Movie goers purchase automated tickets at an AMC movie theater in Arcadia, California on August 2, 2017. Frederic J. Brown/AFP via Getty Images

  • AMC stock has doubled in price since the beginning of the week amid renewed interest from Reddit users.
  • The rally began early in the week after Wanda Group sold most of its remaining stake in the company.
  • Short sellers lost $1.77 billion on GameStop, AMC, and Virgin Galactic so far this week, according to data from ORTEX.
  • See more stories on Insider’s business page.

Shares of AMC Entertainment have doubled in price this week as retail traders continue to pour into the stock.

AMC, the world’s largest movie theater chain, is on a four-day hot streak, gaining as much as 102% week-to-date. As share prices rose, so did the number of Reddit comments about AMC, according to HypeEquity data.

On Wall Street Bets, the 10-million member thread best known for starting the GameStop saga earlier this year, Redditors rallied behind the stock, posting the usual rocketship and moon emojis, indicating their view that the stock has a long runway for gains.

One Redditor said, “Get em AMC gooooo.” Another said “AMC to 26 by noon then to the moon,” while others predicted shares would go as high as $30. At 1:20 p.m. ET, shares traded at $24.27.

The AMC rally began earlier this week after Redditors cheered newly available shares on the market, thanks to the company’s once largest shareholder, private Chinese conglomerate Dalian Wanda Group, selling almost all of the remainder of its stake in the company.

Wanda Group bought AMC in 2012 for $2.6 billion and began selling down its stake in December after the company posted a $4.6 billion loss in 2020. Wanda Group’s stake is now just .002%.

Following the news, one Redditor proclaimed, “We now hold the future of this company!”

Meme stocks, like AMC, GameStop, Virgin Galactic, and BlackBerry, have all seen strong gains this week amid positive sentiment about the companies from retail traders on Reddit.

And short sellers have lost a fortune. The latest data from ORTEX shows short sellers lost $1.77 billion on their positions in GameStop, AMC, and Virgin Galactic so far this week.

But short sellers haven’t given up. The data show that short interest in the companies has actually gone up during the week. According to MarketBeat data, short interest in AMC is 21%. Short interest for GameStop, Virgin Galactic, and BlackBerry, is 21%, 24%, and 9%, respectively.

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GameStop and AMC short-sellers just lost $618 million in a single day as meme stocks rallied sharply

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Getty Images / Corbis News

  • GameStop and AMC jumped Tuesday, causing short sellers to lose $618 million in one day: ORTEX.
  • Shorts on the two Reddit-favorites have lost more than $1 billion so far this month.
  • So far this week, shares of AMC are up 36% and GameStop is up 19% since Friday’s close.
  • See more stories on Insider’s business page.

New rallies in Gamestop and AMC stock caused short sellers to lose $618 million on Tuesday alone, new data from ORTEX shows.

The meme stocks continued to rise in after-market trading and early on Wednesday, pushing short-sellers’ one-day losses even higher to $754 million, according to ORTEX.

GameStop rose 16% Tuesday, closing at $209.43, while AMC rose 20%, closing at $16.41. Both stocks continued to rally in pre-market trading Wednesday.

“AMC and GME have yet again had an incredible start to the week,” said Peter Hillerberg, co-founder of ORTEX. “As the short positions in these stocks are very large, this also generates large losses for anyone holding a short position.”

In total, short seller losses have tallied more than $1 billion in May amid the month-long rally in AMC and GameStop, which have jumped 64% and 21%, respectively.

Per stock, AMC shorts have lost $607 million and GameStop shorts have lost $442 million in May, ORTEX data show.

Short interest in both stocks remains high. According to MarketBeat data, GameStop short interest is at 20.8%, and AMC is at 19.5%.

GameStop and AMC have been two of the most hyped stocks on Reddit this week, according to HypeEquity data. Early on in the week, retail traders on the Wall Street Bets subreddit cheered newly available shares of AMC after the company’s largest shareholder, Chinese conglomerate Dalian Wanda Group, sold nearly all of its remaining stake in the movie theater chain.

“We now hold the future of this company!” one Redditor posted following the news.

The meme-stock phenonmenon blossomed earlier this year when an army of retail traders on Wall Street Bets caused shares of GameStop to skyrocket, squeezing short sellers. The traders have driven up prices for other stocks, like AMC and BlackBerry, as well. They are also looking for new targets, and might be eyeing a heavily shorted real estate lender for a new short squeeze.

The bouts with Reddit day traders have taken short sellers on a wild ride.

In just five trading days from May 11-17, short sellers posted $930 million in losses. Also last week, Melvin Capital, the hedge fund that lost more than 50% in a single month betting against GameStop, closed out of all of its public short positions, though it could still be shorting stocks privately.

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GameStop and AMC short-sellers have lost almost $1 billion in just 5 days of trading amid a meme-stock rally

Stonks meme
KnowYourMeme

  • GameStop and AMC short-sellers have lost $930 million on their positions over the last five days, according to data provider ORTEX.
  • Short positions for the stocks remains high with AMC at 18.3% of free float and GameStop at 21.8%.
  • The short-seller squeeze is exactly “what the Reddit army is hoping for,” said ORTEX’s co-founder.
  • See more stories on Insider’s business page.

Investors betting against GameStop and AMC Entertainment shares have lost nearly $1 billion in the last five trading days alone, new figures from ORTEX show.

According to the data, GameStop and AMC short-sellers lost $930 million on their positions over the last five days of trading as both stocks rallied. Monday alone, AMC shorts lost $210 million and GameStop shorts lost $227 million.

Short positions in the stocks remains high, which causes “large losses” for anyone with a short position, ORTEX co-founder Peter Hillerberg told Insider in an email. AMC short interest is at 18.3% of free float and GameStop short interest is at 21.8%, according to ORTEX.

“The sharp price increase can cause short position holders to try to close their positions by buying back the shares, causing additional demand which in turn can cause the share price to go up further,” Hillerberg said.

“This is what the ‘Reddit army’ is hoping for,” he said.

Read more: The GameStop mania driven by Reddit traders isn’t simple market trolling. It’s a populist movement threatening to disrupt the financial system to a degree Occupy Wall Street only dreamed of.

Shares of both companies fell Tuesday, according to Investing.com data.

Before that, AMC was on a multi-day rally after Redditors on Wall Street Bets and other subreddit groups pushed for a short squeeze in the meme stock. On Twitter Monday, the phrase #SqueezeAMC was trending. That trend, Hillerberg said, indicates, “this is a large and very vocal community.”

Adam Aron, CEO of AMC – the world’s largest cinema chain operator – thanked Reddit and Robinhood traders on an earnings call earlier this month for boosting the stock. So far this year, shares have rallied roughly 500%.

The popular trend of meme stocks began with GameStop, though. In January, an army of Reddit day traders pushed the shares to rally from single to triple digits in an effort to squeeze short sellers.

Shares hit their lowest in a month on May 11, sinking to $136.50, and have since rallied, trading at around $175 Tuesday.

The company nodded at Redditors last week in a tweet that was later deleted in which an astronaut sat on the moon, a likely reference to a popular Reddit phrase about the stock price going “to the moon.”

GameStop short sellers have lost billions amid the share rally this year, forcing some to cut their losses and exit their positions.

Amid the months-long saga, GameStop has seen a management shakeup, with activist investor Ryan Cohen joining the board and CEO George Sherman announcing his departure. The company has also strengthened its balance sheet, eliminating $216 million in debt.

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