GameStop Slaughter of Hedge Fund Shorters by Robinhood Investors Offers New Sport to the Bash-the-Rich Millennials

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Private investors are taking their revenge out on Wall-Street professionals through the humiliation of those funds which shorted GameStop Corp.

Many younger investors have been saving to buy unaffordable houses while paying exorbitant rents and being excluded from self-certified mortgages due to their abuse by the generation before them.

Their new ‘sport’ is to club together through websites like ‘Reddit’ to string-up the hedge funds which dare short their favourite and sometimes troubled companies.

Another platform ‘Wall Street Bets’ also gained another 1m new followers on the back of the GameStop move.

GameStop which runs 5,509 retail stores selling video games was a classic name for Robinhood investors in the way that Blockbuster video was big to the older generation.

Shorting this company was an affront to the new management rescue, restructuring and the millions of gamers who loved the stores.

GameStop supporters spread the word on Reddit to extraordinary effect helped by a well-timed tweet from Elon Musk on ‘Gamestonk’ causing the shares to rise and exposing shorters in the stock to massive losses.

Hedge funds had shorted more than the 70m shares in issue, a situation made worse with only 20m shares in liquid circulation and no new issue of stock in sight.

But the situation has the potential to unravel and deleverage a lot of long and short positions by hedge funds, as closing out the shorts starves hedge funds of funds they use for leveraged long trades.

We expect Hedge funds to close short positions in smaller, less liquid stocks and while there will be relatively few GameStock situations, there will be stocks that rise on the move.

Hence the correction in global markets as hedge funds are de-risked and also helped by other investors joining in on the selling.

The tech market has built up to extraordinary levels and was vulnerable to any sort of end-of-bull-run signal. It mattered not what the signal was but GameStop was a good one.

But, we don’t think the bull run is over for 2021, not yet anyway.

There is too much money looking for interesting equity plays and the ‘electrification’ and ‘greenifying’ of transport and power generation is a revolution that offers real gains for investment in companies supplying raw materials and technology in this space.

We love the idea of Robinhood investors taking from the rich and redistributing the spoils amongst their merry band.

We love the idea of short sellers being squeezed like the Sheriff of Nottingham, as they think nothing of shorting your favourite stocks to nothingness and making out like robber barons.

Robinhood and the NYSE restricted trading of GameStop today and were immediately hit with a Class Action lawsuit requiring the platforms to reopen to GameStop trade in true Robinhood style.

The more small traders feel they are being treated unfairly when going against the hedge funds the more the movement is likely to gain pace.

And, why shouldn’t private investors buy up shares against the short positions Hedge funds which have been free to decimate stocks through short selling for years?

Many Hedge funds are financed through the Prime Brokerage desks of the major Wall Street banks, with stock that is expensively borrowed from Long only, often pension funds.

Stock that allows hedge funds to lob sell orders into stocks when they are at their most vulnerable on low-liquidity days to manipulate shares lower.

So when Robinhood investors say they are going up against Wall Street in ‘Stopping Out’ hedge fund shorts, they really are going against Wall Street and the machine that feeds the fat cats in Prime Brokerage and Stock Lending.
And if regulators are to do anything, maybe they can STOP the practice of stock lending with stock that is sourced from ‘long only’ funds.

We often get involved in the rescue and restructuring of small businesses and we see perfectly decent underlying businesses damaged by sellers with short term outlooks and not a care for the businesses, jobs and careers which they decimate.