Retail trading frenzy sparks jitters for noted GameStop short-seller

N Citron

26/01/2021 18:51

(Recasts, adds comments by Andrew Left, market details)
    By Svea Herbst-Bayliss
    BOSTON, Jan 26 (Reuters) - Short-seller Andrew Left does not
usually smoke. But on Monday he had a cigarette to calm his
nerves as shares of GameStop Corp  GME.N , the stock he had
shorted, continued to rocket higher. 
    Left, who has built a reputation by targeting companies he
thinks are overvalued, is as convinced as ever that videogame 
retailer GameStop is a dying business whose stock price will
fall sharply someday. He said on Tuesday he is still short the
stock, which means he has bet that the price will fall, and more
convinced than ever of his position.
    "If I had never been involved in GameStop and came to this
right now, would I still be short this stock? 100 percent,"
Left, who runs Citron Research and a hedge fund, told Reuters on
Tuesday. "This is an old school, failing mall-based video
retailer and investors can't change the perception of that."
    GameStop did not immediately respond to a Reuters request
for comment.
    Shares of GameStop jumped 22% on Tuesday after surging 144%
a day earlier, as individual investors again piled into a number
of niche stocks, prompting short sellers to scramble to cover
losing bets.  urn:newsml:reuters.com:*:nL4N2K12NN
    Left shorted the company's stock - selling borrowed shares
in a bet that the price will fall and that the shares can be
bought back at a lower level - when it traded around $40 a share
and forecast publicly that it would tumble to $20 a share.   
    Since Left spoke out publicly about GameStop earlier this
month, other investors have turned out en masse to take the
other side of short-sellers' bets, forcing the stock up some
308% this year to trade at $112.45, or up 47% on Tuesday. 
    Along the way, Left said he has been threatened - although
he declined to specify how - and asked authorities to
investigate. 
    "Everyone thinks this stock sucks and the only reason people
are buying it and own it is that for them it is a game." 
    He added, "I created this game, based on uncovering the
truths ... so I can't get mad at people for taking the other
side."
    The market fury, however, is something that Left, who has
been posting his research for two decades and has taken on
prominent hedge fund managers like Bill Ackman at companies like
Valeant, has not seen before.
    Short selling is something every hedge fund is technically
able to do but only a handful of firms - including Citron, Jim
Chanos' Kynikos Associates, Carson Block's Muddy Waters
Research, and Ben Axler's Spruce Point Capital Management - 
specialize in.
    Many hedge funds acknowledged over the last months that
shorting had hurt their performance and Melvin Capital, a $13
billion hedge fund, on Monday received a financial lifeline from
hedge funds Citadel and Point72 Asset Management after having
been deeply hurt by short bets that went the other way.
    The pain continues for short investors as some of the
market's most shorted stocks like retailers Bed Bath & Beyond
 BBBY.O  and Dillard's Inc  DDS.N  have marched higher in the
last days.
    "I don't smoke but yesterday I was outside smoking a
cigarette," Left acknowledged with a laugh, explaining his
current stress. Last year his two-year-old fund returned 155%,
after gaining 43% in 2019. 
    This year the Citron fund is off 2.5% since the beginning of
January, Left said. "This kind of situation teaches you proper
allocation," he said. 

 (Reporting by Svea Herbst-Bayliss in Boston
Editing by Megan Davies and Matthew Lewis)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))