Day traders are credited with unleashing a revolution on Wall Street, helping to increase GameStop Corp’s stock. GME,
and AMC Entertainment Holdings AMC,
and shaking the hedge fund industry segment base in the process.
Now, a group of data providers is betting that financial markets will never be the same and that investors with lots of money will spend a lot of money to monitor discussions on message boards like Reddit’s r / wallstreetbets and social media platforms like Discord for mentions of publicly traded companies.
“We believe this is a kind of watershed moment and perhaps irreversible,” Boris Spiwak, director of marketing for alternative data company Thinknum, told MarketWatch in an interview on Monday. Thinknum’s plans were mentioned in an article by Barrron over the weekend.
Spiwak said he sees customers using services from companies like Thinknum not only as a way to profit from conversations on social media platforms, but also as a form of crisis management, as groups of individual investors come together on platforms to come together around investment ideas.
“This is very new and we see it as a purchase for crisis management, as an insurance policy and a way to increase returns and minimize losses,” he told customers.
The Thinknum service, which started last week, is one of the most expensive it offers customers, costing just under $ 25,000 a year, to track the number of times that companies listed on the New York Stock Exchange and Nasdaq’s are called on sites like r / wallstreetbets or other Reddit sub-reddits.
“The demand has been huge – we have received over 100 requests for hedge funds in the past few days,” wrote Thinknum’s chief marketing officer.
So far, interest in these expensive products has come from fund managers, but the company says it is also responding to inquiries from institutional investors looking for “an insurance policy to protect itself from Reddit.”
The moves by the alternate data company come from video game retailer GameStop and other companies, such as the AMC Entertainment movie network and headphone maker Koss Corp. KOSS,
experienced a parabolic increase in stock values in a short period, as investors flocked to sites like Reddit’s / wallstreetbets, pouring millions into heavily sold companies to trigger a rise in those stocks.
The recent advance in heavily sold shares, targeted by the army of individual investors, appeared to be causing pain to hedge funds.
Melvin Capital Management, one of the hedge funds seen at the center of the GameStop confusion, lost 53% in its investments in January, wrote The Wall Street Journal, citing people he knew. The WSJ also said that another hedge fund, Maplelane Capital, ended January with a loss of about 45%.
Meanwhile, Andrew Left, founder of Citron Research, last Friday, a famous short seller, changed his strategy, saying his company would no longer publish short sales reports. Left was seen attracting the ire of individual investors for his negative views of GameStop – a traditional retailer that, he said, was worth only about $ 20 amid a growing shift in digital video game sales.
“Young people want to buy shares. This is the zeitgeist, ”Left said of his decision to go out of business to identify companies that he believes are overvalued and publicly announce that he is betting that his stocks will sink.
“They don’t want to sell stocks, so I’m going to help them buy stocks,” said Left of his focus on long-term investments.
Other companies, including SimilarWeb, are also trying to promote tools for investors to keep track of investments and discussions on popular social media sites and some popular trading platforms.
SimilarWeb says it can track searches for stock ticker symbols between users of the mobile app and desktop users on the Robinhood Markets platform, for example. SimilarWeb says that research activity can be indicative of real trading and can help clients identify trends in advance, according to Ed Lavery, director of investor solutions at SimilarWeb.
SimilarWeb
SESAMm, which calls itself a leading provider of analytics and artificial intelligence for investment professionals, has also developed or is working on services that can help identify social media trends, said Spiwak.
SESAMm, which recently obtained about 7.5 million in venture capital financing from NewAlpha Asset Management and global investment firm The Carlyle Group, did not immediately return an email for comment.
Meanwhile, the liquidation of profitable long positions by hedge funds and other investors who needed money to cover losses on the loss of short positions was held responsible for the Dow Jones Industrial Average DJIA,
the S&P 500 SPX index,
and the Nasdaq Composite Index COMP,
recording its worst weekly losses since October last Friday.
Markets were trying to recover those losses on Monday, starting what must be a turbulent February.