Video game retailer GameStop’s dramatic rise is generating new millionaires and costing hedge funds billions of dollars – at least on paper.
GameStop’s shares rose an additional 70 percent on Friday, in an impressive recovery led by small investors on the Reddit online forum, which has seen shares rise 1,800 since the beginning of January.
The army of small traders who buy the shares are vowing to keep them to force the hedge funds that bet against him to pay dearly to cover his losses – meaning that many of the new fortunes will be destroyed if and when the bubble bursts.
But for now, Robinhood traders like AJ Vanover, who makes about $ 35,000 a year selling auto parts in Missouri, are in the money. Robinhood de Vanover’s balance exceeds $ 1 million, according to images he shared with CNN.
Keith Gill, YouTuber aka ‘Roaring Kitty’, was one of the leaders of the GameStop insurgency, promoting the potential for a small squeeze on his YouTube channel
On Friday, Gill shared a screenshot of his trading account showing that he earned $ 31.5 million from a $ 755,000 investment he made in GameStop’s stock and options in July
Vanover, like many others, has yet to cash out and his winnings can still be erased. But if it ends up on the winning side of the deal, he says he hopes to help his parents with the mortgage and keep investing.
Vanover was off work this week, quarantined after a co-worker hired COVID-19, but now thinks he won’t be returning to his old job.
“I know I will give two weeks’ notice,” he told CNN, laughing. ‘So, I’m going to be nice about it.’
Keith Gill, YouTuber also known as ‘Roaring Kitty’, was one of the leaders of the GameStop insurgency, promoting the potential for a small squeeze on the Reddit WallStreetBets forum, where users exchange tips and share opinions.
On Friday, Gill shared a screenshot of his trading account showing that he earned $ 31.5 million from an investment of $ 755,000 that he made at GameStop in July.
“I thought this deal would be successful,” he told the Wall Street Journal, “but I never expected what happened last week.”
He said he would like to continue his YouTube channel ‘Roaring Kitty’ and buy a home. He also dreams of building a covered track or country house in Brockton, Massachusetts, his hometown.
The biggest winners in the price action were GameStop’s large long-term shareholders.
GameStop’s largest individual shareholder, Ryan Cohen, has seen its 13% stake increase the value by more than $ 2 billion in the past two weeks, or more than $ 6 million an hour
GameStop investor Donald Foss (left), former CEO of a subprime car lender, saw his 5 percent stake in GameStop increase by about $ 800 million, and the CEO’s 3.4 percent stake of GameStop, George Sherman (right) rose by about $ 500 million
GameStop’s largest individual shareholder, Ryan Cohen, has seen its 13% stake increase in value by more than $ 2 billion in the past two weeks. Co-founder of online pet supply store Chewy, who joined GameStop’s board this month, originally paid about $ 76 million for the stake and saw his net worth increase by about $ 6 million an hour the past two weeks.
Meanwhile, investor Donald Foss, former CEO of a subprime auto lender, saw his 5% stake increase by about $ 800 million, and the 3.4% stake in GameStop CEO George Sherman increased about $ 500 million.
In addition to individual stakeholders, BlackRock, the largest asset manager in the world, could have made gains of about $ 2.4 billion on its investment in GameStop.
The asset manager owned about 9.2 million shares, or an approximately 13 percent stake, in GameStop on December 31, 2020, a regulatory document showed on Tuesday.
Assuming no change in BlackRock’s position, its stake would be $ 2.6 billion now, compared to $ 173.6 million in December.
Hedge funds face billions in potential losses from GameStop bets
On the losing side of the recent price action were several hedge funds, which had heavily sold GameStop shares, betting that the stock price would fall.
Short selling is a way to make money on a stock if the share price drops, and GameStop was one of the best selling stocks on the market when the Reddit group targeted it.
On Friday, investors who bet against GameStop had losses of around $ 19 billion, with the loss reaching $ 10 billion just on Wednesday, when GameStop’s shares rose 135 percent, according to data from Ortex provided to Business Insider.
Hedge funds Citron and Melvin Capital said on Wednesday they closed their short positions after suffering undisclosed losses.
Citron Research founder Andrew Left – formerly called ‘Bounty Hunter of Wall Street’ and one of the top investors who bet against GameStop – said Friday morning that he would no longer publish ‘short reports’ and instead , would focus on ‘long-term’ investment opportunities, a term to bet that a company’s stock will rise.
The notorious short-selling activist said he removed the plug from his bets against GameStop after suffering a 100 percent loss from the rise in shares this week.
Melvin Capital, the $ 12.5 billion hedge fund founded by Gabriel Plotkin, was a major target of the Reddit campaign, after a SEC filing revealed that the fund had a large short position on GameStop.
New York Mets owner Steve Cohen also came into contact with the turbulent situation after his Point72 Asset Management helped save Melvin Capital
New York Mets owner Steve Cohen was also exposed to the turbulent situation after his Point72 Asset Management teamed up with Ken Griffin’s Citadel firm to inject Melvin with a combined $ 2.75 billion bailout on Monday to help the distressed fund.
Responding to a concerned Mets fan on Twitter who asked if the GameStop situation would impact the team’s payroll, Cohen wrote, “Why would one have something to do with the other?”
Maplelane Capital LLC, a New York hedge fund that started the year with about $ 3.5 billion, fell about 30 percent in the year through Wednesday, with its low GameStop position a significant driver of losses , sources told the Wall Street Journal.