Gamestop hype: hedge funds earn $ 700 million

Gamestop hype
Hedge fund earns $ 700 million

With Gamestop shares going through the roof, two hedge fund managers are making the business of their lives. The attack by hobby gamblers on short sellers brings the professionals several hundred million dollars in profit.

When an army of hobby speculators pushed the price of the Gamestop share up and thus drove hedge funds to the brink of bankruptcy, they stylized it as a victory of the amateurs over the professionals. But the reality is not that simple. For example, the New York hedge fund Senvest earned a whopping $ 700 million from the hype.

GameStop Corporation 67.62

As the "Wall Street Journal" reports, the hedge fund managers Richard Mashaal and Brian Gonick had already bought shares in the ailing video game dealer in September – long before the madness that broke out in January. When the price suddenly skyrocketed from $ 10 to $ 400, the pair made the deal of a lifetime. "When things started slowly, we thought something bigger was about to happen," said Mashaal. "But we had no idea how crazy it was all going to be."

The hedge fund began showing interest in the troubled company early last year. At that time, Ryan Cohen, the video game dealer's largest single shareholder, increased his stake to just under ten percent. In addition, the founder of the e-commerce company Chewy announced that it would become more involved in business operations.

Musk tweet becomes an exit signal

At the time, most Wall Street analysts recommended that you just don't buy the stocks. In addition, there were high bets on falling prices. Because Gamestop has so far mainly sold games and consoles in branches – not online. But after speaking with management and looking at the market environment, Mashaal and Gonick joined the company. You trusted the management to transform themselves into a digital salesperson. At the end of October, Senvest owned more than five percent of the shares and paid less than $ 10 for most of the shares.

When Gamestop shares took off in January, Mashaal and Gonick sold the first shares. And when Tesla founder Elon Musk fueled the hype even further by tweet at the end of the month, they sold their entire package. You can watch the recent price losses calmly.

Both managers will in future closely monitor the discussions of hobby traders in Internet forums before their fund bets against or on a stock. "I don't assume this is over," said Gonick.