The staggering rally of shares in the beleagured video game retailer GameStop is creating new millionaires and hedge funds cost billions of dollars – at least on paper.
GameStop shares rose another 70 percent on Friday in a staggering surge by small investors on the online forum Reddit, which has been rising 1,800 shares since the beginning of January.
The army of retailers buying up the stock promises to hold on to their shares to force hedge funds that have pledged against it to pay through the nose to cover their losses – meaning much of the new fortune will be wiped out if and when the bubble bursts.
But for now, Robinhood dealers like AJ Vanover, who earn about $ 35,000 a year to sell auto parts in Missouri, are in the money. Vanover’s Robinhood balance is more than $ 1 million, according to screenshots he shared with CNN.
YouTuber Keith Gill, also known as ‘Roaring Kitty’, was one of the leaders in the GameStop uprising, which boosted the potential for a brief push on his YouTube channel.
Gill shared a screenshot of his trading account on Friday that shows he is $ 31.5 million higher than a $ 755,000 investment he made in GameStop shares and call options in July.
From above, like many others, he does not have to make money yet, and his profits can still be wiped out. But when he ends up on the winning side of the trade, he says he hopes to help his parents with their mortgage and invest further.
Vanover was quarantined from work this week after a colleague contracted COVID-19, but now thinks he will not return to his old job.
“I know I’m going to take two weeks off,” he told CNN laughing. “I’ll be nice about it.”
Keith Gill, the YouTuber also known as ‘Roaring Kitty’, was one of the leaders in the GameStop uprising, which promoted the potential for a brief push on the RedStit forum WallStreetBets, where users trade stocks and opinions.
On Friday, Gill shared a screenshot of his trading account showing that he is $ 31.5 million higher than 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 this 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 a field house in Brockton, Massachusetts, his hometown.
The biggest winners in the price action were GameStop’s large and long-term shareholders.
GameStop’s largest individual shareholder, Ryan Cohen, has increased its 13% stake 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 car lender, increased his 5 percent stake in GameStop by about $ 800 million, and George Sherman (right), GameStop CEO, ( 3.4%)’s stake is about $ 500 million.
GameStop’s largest individual shareholder, Ryan Cohen, has increased its 13 percent stake by more than $ 2 billion over the past two weeks. The co-founder of online retailer Chewy, who joined the board of GameStop this month, originally paid about $ 76 million for the stake and has increased its net worth by about $ 6 million an hour over the past two weeks.
Meanwhile, investor Donald Foss, the former CEO of a subprime car lender, increased his 5 percent stake by about $ 800 million, and GameStop CEO George Sherman’s 3.4 percent stake is about $ 500 million. million.
In addition to the individual stakeholders, BlackRock, the world’s largest asset manager, was able to make a profit of about $ 2.4 billion on its investment in GameStop.
As of December 31, 2020, the asset manager owned approximately 9.2 million shares, or a 13 percent stake, in GameStop.
Assuming there is no change in BlackRock’s position, the value of its stake will now be worth $ 2.6 billion, compared to $ 173.6 million in December.
Hedge funds have billions in potential losses due to betting on GameStop
At the end of the recent price action, there were a number of hedge funds that severely shorted GameStop shares, betting that the share price would fall.
Short selling is a way to make money from a stock when the stock price drops, and GameStop was one of the shortest stocks on the market when the Reddit group targeted it.
As of Friday, investors betting on GameStop are facing about $ 19 billion in losses, with the damage amounting to only $ 10 billion on Wednesday, when 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 had closed their short positions after suffering unknown losses.
Citron Research founder Andrew Left – once called the ‘Bounty Hunter of Wall Street’ and one of the top investors betting on GameStop – said on Friday morning that he would no longer publish ‘short reports’ but would focus on: on opportunities for ‘long’. ‘investments, a term to bet that the stock of a company will rise.
The infamous activist short seller claims he is slamming his bet against GameStop after suffering a 100 per cent loss when the stock rose this week.
Melvin Capital, the $ 12.5 billion hedge fund set up by Gabriel Plotkin, was one of the key targets of the Reddit campaign, after an SEC filing revealed that the fund had a large short position in GameStop has.
New York Mets owner Steve Cohen was also exposed to the turbulent situation after she helped Point72 Asset Management save Melvin Capital.
Steve Cohen, owner of the New York Mets, was also exposed to the turbulent situation after his Point72 Asset Management teamed up with Ken Griffin’s firm Citadel to give Melvin a $ 2.75 billion joint bailout Monday to help the struggling fund to help.
In response to a concerned Mets fan on Twitter asking if the GameStop situation would affect the team’s payroll, Cohen wrote: ‘Why would the one have anything to do with the other’?
Maplelane Capital LLC, a hedge fund in New York that started the year with about $ 3.5 billion, fell about 30 percent during the year to Wednesday, with its bearish GameStop position a significant driver for losses, sources said. told the Wall Street Journal.