Friday 29th January 2021
The house always wins
Stock exchange feuds primarily use funds and brokers
Hedge funds and small investors organized via online forums have been fighting for days over the video game retailer Gamestop. Investors want to overthrow the "bad" funds and make money themselves. But the cash register rings in the background, especially at the classic institutions.
The house always wins. This saying from the world of the casino also applies to the battle between small investors and hedge funds for the US video game retailer Gamestop. "The house" in this case are mainly the large, traditional investment funds, says Larry Harris, economics professor at the USC Marshall School of Business and former chief economist at the US Securities and Exchange Commission.
In the case of Gamestop and other stocks, so-called short sellers had borrowed shares in the companies concerned and sold them immediately. They bet on being able to stock up on the papers cheaper by the return date. If they are successful, they will reap the difference as a profit. Retail investors thwarted these plans by meeting online to make targeted purchases. Because the share price did not fall as hoped, the hedge funds had to resolve their bets to minimize their losses. This gave Gamestop & Co an additional boost.
Classic asset managers who hold shares for a longer period in order to benefit from price increases and distributions earn double income from these transactions: On the one hand, they collect loan fees from hedge funds. Since they officially still own the papers, they reap book profits when the share price rises. According to industry service Datalend, the volume of stock lending fees worldwide in 2020 amounted to $ 7.66 billion.
Online broker needs billions in cash
The Fidelity Low-Priced Stock Fund of the asset manager Fidelity currently holds two million Gamestop shares according to the latest mandatory disclosure. Before the price explosion began, this package was worth around $ 40 million. At the previous record high of $ 482.95, it swelled to just under $ 1 billion. The fund did not want to provide any information on a possible sale of Gamestop shares. In the depots of the world's largest asset manager Blackrock there are even 9.2 million papers, which are currently worth around four billion dollars.
Broker houses like Charles Schwab and Citadel Securities are another group of profiteers, says Professor James Angel of Georgetown University. The increased trading turnover flushed additional fees into their till. On Thursday, almost 20 billion shares changed hands on Wall Street, almost a third more than the average for the preceding days.
For online brokers, which are popular with small investors, the stock market hype is a double-edged sword. According to a report in the "New York Times", the trading platform Robinhood.com, which is attributed to a central role in the current concerted retail investor purchases, needed a short-term injection of billions. The online broker had previously announced that it would have to deposit higher collateral due to the increased trading volume. In Germany, the rush of investors brought the trading systems of the online broker Trade Republic to its limits.
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