The GameStop Phenomenon? Some of Europe’s Most Heavily Shorted Stocks Are Rising
Last Updated: Jan. 27, 2021 at 11:40 a.m. ETFirst Published: Jan. 27, 2021 at 11:26 a.m. ET
By
Barbara Kollmeyer
Cineworld stock rose on Wednesday along with other heavily shorted European stocks.
As another dramatic day shaped up for the battle between retail investors and hedge funds in the U.S., shares of some of Europe’s most shorted stocks were climbing.
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The moves come as videogames retailer GameStop surged another 150% early on Wednesday. Shares have gained 1,864% in January as retail investors, organizing via forums such as Reddit’s WallStreetBets, sought to boost a group of heavily shorted stocks.
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Reddit Traders Bludgeon Melvin Capital in Warning to Wall Street
3 hours ago
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A popular rebellion, organized by the powerless against the powerful. It might have failed in Washington, but it certainly seems to be working on Wall Street.
Driving the news: The market value of GameStop closed at more than $10 billion on Tuesday, on record volume of more than $26 billion.
- The winners: A ragtag group of traders from Reddit and TikTok, led by a man calling himself “Roaring Kitty.”
- The losers: Hedge-fund short-sellers wh0 are learning John Maynard Keynes's lesson the hard way — "The market can remain irrational longer than you can remain solvent."
How it works: Thanks to Robinhood and other stock-trading apps, trading options in GameStop (or BlackBerry, Bed Bath & Beyond or any other smallish company Wall Street traders have bet against) is easy, fun, and carries an irresistible commission of exactly $0.
- Giant hedge funds like Melvin Capital now find themselves at the mercy of thousands of small investors using the internet to coordinate their buying attacks.
The bottom line: Short-selling — betting that a company's stock is going to fall — is a crucial element of efficient markets. But, thanks to Reddit, it has also never been more dangerous.
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