Andrew Left is no stranger to conflict when it comes to investing. He makes a living betting that companies will stumble, and he calls managers by their name.
Companies and their supporters are fighting back, but the criticism he usually gets is nothing compared to the poison that has been piled up over the past few days by stock traders who have gathered online to increase shares of an unlikely momentum stock, GameStop. Corp.
GME 87.86%
“It makes you feel vulnerable,” he said. Left (50), founder of Citron Research, said in an interview. “We live in a world where we are all exposed and people do not understand boundaries.”
The malicious traders shared his personal information, in the social media accounts of Mr. Left chopped and mr. Left and his two children texted, using threatening, wicked and personal language, according to people close to the case.
Other short sellers have also been targeted in these forums. In the past week, there has been an increase in referrals to well-known short sellers such as Mr. Left and Muddy Waters LLC’s Carson Block on Reddit channels, blogs and other social media, according to a review by Meltwater.,
a global media intelligence company.
Muddy Waters, mr. Block, who made a name for himself from Chinese stocks, said he had received death threats and other nasty things in the past, although the abuse always seemed tamer in the investment world than in politics.
“People have always been much more pragmatic about their money than their political beliefs, making it possible for activist short sellers to consult with investors,” he said. Block said. “Perhaps this is what happened to Andrew, an expression of the pragmatism that is similar to the severe errors you see in politics and elsewhere.”
Online forums like WallStreetBets from Reddit are full of traders who boast of defeating the big investors who normally control the market. It’s an ironic twist, or a sign of their lack of understanding, that they equate short sellers with the Wall Street business.
Short sellers are additional players who follow behind companies and institutions that largely support the rest of the financial world. They often make bets based on in-depth research, and sometimes fraud is exposed. Recent successes include businesses such as Nikola Corp.
, Wire card AG
and Valeant Pharmaceuticals International Inc.
Muddy Waters’ Carson Block believes the short-term pressure on GameStop will end badly for traders, who ignore the ‘investment lessons of the past’.
Photo:
brendan mcdermid / Reuters
But they are often rich. And in some cases, individual investors have been burned out by their short selling campaigns. Nikola, for example, was a favorite stock of retail momentum traders.
This time, Mr. Left GameStop targeted, which soon became the subject of a short pinch, where rising prices prompted clumsy investors to buy back shares they sold to reduce their losses, pushing the stock even higher. Traders have increased the price of GameStop three times since Thursday when Mr. Left held a live presentation arguing that the share would fall by 50%.
The fans of the company ordered dozens of pizzas that were already sent to his house after midnight. Mr. Left even reached out to one online critic after calling Mr. Left asked why he made his Twitter account private. “We talked on the phone, he sounded like 15 years old,” he said. Left said.
Mr. Left also contacted the Federal Bureau of Investigation and the Securities Exchange Commission about the more brutal abuse and what he sees as collusion among investors. In a YouTube video posted Wednesday, Mr. Left said he has now closed most of his short position.
Current and former regulators say authorities do have the means to curb online groups plotting to pump shares. There have been several instances where authorities have successfully won cases against groups of investors who came together online to manipulate the price of a stock. In most cases, they targeted those who spread false information online.
It is unclear whether what is happening now online can be considered manipulation. Many of the posters simply announce that they intend to drive a stock higher, and not to mislead other investors by making false claims.
Current and former regulators say there are mechanisms for the SEC to quickly curb some of these activities. Just as when the SEC banned short selling in hundreds of businesses at the height of the financial crisis, it could take emergency measures that would make it harder to trade options, which many traders use to soften their returns and drive the stock higher.
According to Meltwater, the vitriol against Mr. Block, Mr. Left and Gabe Plotkin, the hedge fund Melvin Capital Management, mostly started the past ten days. Mr. Plotkin held a short position in GameStop.
Mr Links received the most so-called ‘negative’ sentiments. Most of the online content comes from the US, but users from China were also a big part of the effort.
Mr. Left said the attacks by traders on him are a sign of the risks they are taking by taking trading options and buying stocks on the markets near all times. The fact that so many investors are being summoned amid the coronavirus pandemic brings even more people to the fore.
“It’s extreme capitalism that has gone wild,” he said. Left. “We are a nation of gamblers.”
Mr. Block believes it will end badly for the traders, who ignore the “investment lessons of the past”, such as not chasing expensive stocks. In time, he believes the new investors will be burned. “Wild brand speculation always leads to tears,” says Mr. Block.
Write to Gregory Zuckerman at [email protected] and Geoffrey Rogow at [email protected]
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