The Hedge Fund Genius who launched GameStop’s 4,800% campaign calls it ‘unnatural, insane and dangerous’

In April, dr. Michael Burry, the investor of the hedge fund, which made millions of underprime mortgages during the 2008 crisis and was dramatized by Christian Bale in ‘The Big Short’, a daring play in the depths of the Coronavirus pandemic.

Burry’s hedge fund Scion Asset Management has announced that it has bought 5.3% of the bad video game retailer GameStop

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between $ 2 and $ 4.2 per share, and spend about $ 15 million in total. Burry’s game was to urge GameStop to use its cash to buy back shares, which would likely retire half of its outstanding shares. In a sharply worded letter to the board of directors of GameStop, Burry called on the company to lift its $ 300 million repurchase authorization. At the time of its letter, GameStop’s total market value was only $ 300 million.

Burry’s game has helped offset one of the craziest and most out-of-pocket operations in financial history, which has generated billions of dollars in paper profits for some investors, including many amateur speculators, and which could cause billions in losses for some of the world’s most sophisticated hedge funds.

GameStop rose from a low of $ 2.57 per share when Burry built its spring position to more than $ 240 at one point in after-hours trading, as a group of amateur speculators used. social media app Reddit around the corner from GameStop’s heavy short circuit. The subsequent increase in GameStop’s shares created a pressure reminiscent of Volkswagen’s 2008 rise in the depths of the 2008 crisis to a half-billion dollar market capitalization, leading to about $ 30 billion in realized loss of hedge funds.

At the urging of investors like Burry, GameStop has repurchased about $ 200 million in shares since 2019, reducing outstanding shares by 38%. The buybacks, coupled with massive hedge fund commitments against GameStop, as it leads to the decline in in-game video game sales, meant it ended 2020 as one of the world’s heaviest shorted stocks.

Enter Reddit thread r / wallstreetbets, where posters have been trying for months to print out GameStop bears and inflate the company’s inventory. As GameStop gained momentum due to the addition of Chewy

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founder Ryan Cohen as an investor and rising sales of PlayStations, Redditors began to smell blood in the water. A push on social media took place in January, fueling a 881% increase in GameStop shares over the past month.

The battle royally is reminiscent of a similar showdown about 15 years ago, albeit between professional traders, as opposed to today’s iteration, where amateurs magnify themselves against giant funds. In 2006, billionaire John Arnold traded against Brian Hunter of hedge fund Amaranth Advisors on a giant trade (long March / Short April) in natural gas futures. The duel made Arnold a fortune, but Amaranth cost $ 6 billion and caused the fund to collapse.

As GameStop’s valuation rises to $ 14 billion, making some retailers millionaires, it’s at the expense of successful funds. The hedge fund Melvin Capital, one of GameStop’s biggest shorts, has lost a load on GameStop’s pressure. It was allegedly from Monday by 30% lower, according to the Wall Street Journal, and demanded a $ 2.7 lifeline from billionaires Ken Griffin and Steven A. Cohen of Citadel and Point 72 Asset Management, respectively, to stay afloat.

When the pressure turned into a one-off Wall Street fiasco, there were rubber necks, two of Silicon Valley’s biggest noisemakers, Elon Musk and investor Chamath Palihapitiya.

Palihapitiya traded the shares and bought call options on GameStop, which apparently accelerated Tuesday afternoon. After Palihapitiya’s tweet, GameStop rose from the $ 90s to $ 147.98.

Minutes after the market closed, Musk joined the party with even more powerful results. With tens of millions of avid fans worldwide and the ability to move stocks with a single unsearchable tweet, Musk has simply written ‘Gamestonk’. He linked to the Reddit thread where the pressure was coordinated. That was good enough for a 43% increase in GameStop shares in after-sales.

Now, GameStop’s hedge fund bull Michael Burry, probably the person who has fueled the current situation with his massive buyback call, says the pressure is “unnatural, insane and dangerous.” In a tweet, Burry said there should be legal and regulatory implications of the boom. (It turns out he later deleted the tweet).

Maybe Burry is trying to put a lid on the Pandora’s Box that he helped open. Or he might be suffering from a bit of FOMO, or fear of missing it. The 3.4 million shares that Burry bought for about $ 15 million would be worth $ 710 million at current prices, making him an almost billionaire.

Unfortunately for Burry, security fans are being reviewed by Forbes indicates that he sold his GameStop before the fun really started. As of Sept. 30, Burry owned just 1.7 million shares, and it is likely that he continued to sell when GameStop tore to the end of the year.

For more information on GameStop:

GameStop’s massive boom creates new billionaire as Reddit traders bet on Wall Street