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By Svea Herbst-Bayliss
BOSTON (Reuters) – Short seller Andrew Left does not generally smoke. But on Monday, he had a cigarette to calm his nerves as shares of GameStop Corp, the stock he had sold short, continued to soar.
Left, who has built a reputation for targeting companies he thinks are overvalued, is more convinced than ever that video game retailer GameStop is a dying company whose share price will one day drop sharply. He said on Tuesday that he was still short on the title, meaning he bet the price will drop, and more convinced than ever of his position.
“If I had never been involved in GameStop and got to this now, would I still be in the open on this stock? 100 percent,” Left, which runs Citron Research and a hedge fund, told Reuters on Tuesday. . “It’s an old school, failed mall based video retailer and investors can’t change the perception of that.”
GameStop did not immediately respond to a request for comment from Reuters.
GameStop shares jumped 22% on Tuesday after jumping 144% a day earlier, as individual investors again stacked in a number of niche stocks, prompting short sellers to scramble to cover losing bets.
Left company shares shorted – selling borrowed shares in a bet that the price will drop and the shares can be repurchased at a lower level – as it traded around $ 40 a share and publicly forecast that it would drop to $ 20 a share.
Since Left spoke publicly about GameStop earlier this month, other investors have been found in droves to take the other side of the short sellers’ bets, forcing the stock to climb about 308% this year to trade at $ 112.45, or 47% on Tuesday. .
Along the way, Left said he had been threatened – although he declined to say how – and asked authorities to investigate.
“Everyone thinks this title sucks and the only reason people buy and own it is because to them it’s a game.”
He added: “I made this game, based on uncovering the truths … so I can’t get mad at people for taking the other side.”
The fury of the market, however, is something that Left, who has published his research for two decades and hired top hedge fund managers like Bill Ackman at companies like Valeant, has never seen before.
Short selling is something all hedge funds are technically capable of doing, but only a handful of companies – including Citron, Jim Chanos’ Kynikos Associates, Carson Block’s Muddy Waters Research, and Ben Axler’s Spruce Point Capital Management – specialize.
Many hedge funds have acknowledged in recent months that shorting hurt their performance and Melvin Capital, a $ 13 billion hedge fund, received a financial lifeline on Monday from hedge funds Citadel and Point72 Asset Management after was deeply hurt by short bets that went the other way. way.
The pain continues for short investors as some of the best-selling stocks in the market like retailers Bed Bath & Beyond and Dillard’s Inc have gained in recent days.
“I don’t smoke but yesterday I was outside smoking a cigarette,” Left admitted with a laugh, explaining his current stress. Last year, its two-year-old fund returned 155%, after gaining 43% in 2019.
This year, the Citron fund is down 2.5% since early January, Left said. “This kind of situation teaches you good distribution,” he says.
(Reporting by Svea Herbst-Bayliss in Boston; Editing by Megan Davies and Matthew Lewis)
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