The GameStop Short Squeeze shows an ugly side of the investor world

“It makes you feel vulnerable,” Mr. Left, 50, founder of Citron Research, said in an interview. “We live in a world where we are all exposed and where people do not understand borders.”

Angry traders shared his personal information, hacked Mr. Left’s social media accounts and texted Mr. Left and his two children, using threatening, profane and personal language, according to people familiar with the matter. .

Other short sellers have also been targeted in these forums. Over the past week, there has been an increase in referrals to well-known short sellers such as Mr. Left and Muddy Waters LLC’s Carson Block on Reddit channels, blogs and other social media, according to a review from Meltwater.,

a global media intelligence company.

Mr Block of Muddy Waters, who has made a name for himself bypassing Chinese stocks, said he has received death threats and other nastiness in the past, although the abuse has always seemed more docile in the world of investors than in politics.

“People have always been much more pragmatic about their money than their political beliefs, which gives activist short sellers a voice with investors,” Block said. “Maybe what happened with Andrew is an evisceration of that pragmatism similar to the rabid illusions you see in politics and elsewhere.

Online forums like Reddit’s WallStreetBets are full of traders who pride themselves on beating the big investors who normally control the market. It’s an ironic twist, or a sign of their lack of understanding, that they equate short sellers with the Wall Street establishment.

Short sellers are fringe players who prey on the companies and institutions that the rest of the financial world widely supports. They often make bets based on extensive research, sometimes revealing fraud. Recent successes include companies like Nikola Corp.

, Wirecard AG

and Valeant Pharmaceuticals International Inc.

But they are often rich. And in some cases, individual investors have been burned by their short selling campaigns. Nikola, for example, was one of the favorite stocks of dynamic retail traders.

This time, Mr. Left targeted GameStop, which quickly came under short pressure, where rising prices prompt bearish investors to buy back stocks they had sold short to cut their losses, pushing the title even higher. Traders have tripled the price of GameStop since Thursday, when Mr Left hosted a live presentation, saying the stock would drop 50%.

Fans of the company ordered dozens of pizzas sent to his home well after midnight. Mr. Left even contacted an online reviewer after asking Mr. Left why he made his Twitter account private. “We spoke on the phone, he looked like he was 15,” Mr. Left said.

But Mr. Left has also contacted the Federal Bureau of Investigation and the Securities Exchange Commission about the most vicious abuses and what he sees as collusion between investors. In a YouTube video posted Wednesday, Mr Left said he has now closed most of his short position.

Current and former regulators say authorities have the means to crack down on online groups banding together to pump stocks. There are several instances where authorities have successfully won lawsuits against groups of investors who have acted together online to manipulate the price of a stock. In most cases, they have targeted those who spread false information online.

It is not known if what is currently happening online could be considered manipulation. Many posters simply announce their intention to raise the stock and do not attempt to deceive other investors by making false statements.

Current and former regulators say there are mechanisms for the SEC to quickly curb some of this activity. Just like when the SEC banned short selling in hundreds of companies during the height of the financial crisis, it can take emergency measures that would make it more difficult to trade options, which many traders use to optimize their returns and increase the stock.

The vitriol against Mr. Block, Mr. Left and Gabe Plotkin of hedge fund Melvin Capital Management has largely started over the past 10 days, according to Meltwater. Mr. Plotkin had a short position on GameStop.

Mr. Left received the majority of the so-called “negative” feelings. Most of the online content comes from the United States, although Chinese users have also played a big part in the effort.

Mr Left said traders’ attacks on him were a sign of the risks they take when trading options and buying stocks with markets near their all-time highs. The fact that so many investors are locked in the middle of the coronavirus pandemic puts even more people in trouble.

“This is extreme capitalism gone wild,” says Mr. Left. “We are a nation of players.”

Mr Block believes this will end badly for traders, who ignore “investing lessons of the past” like not chasing expensive stocks. Over time, he thinks new investors will be burnt out. “Frantic retail speculation always leads to tears,” says Block.

Write to Gregory Zuckerman at [email protected] and Geoffrey Rogow at [email protected]