Wrapup 1: GameStop slugfest spreads as calls for probe build

N Citron

28/01/2021 09:27

(Wraps trading moves in Europe and Asia, U.S. comments
overnight)
    By Sagarika Jaisinghani and Nikhil Nainan
    Jan 28 (Reuters) - The battle between small-time traders and
hedge funds that has shaken U.S. and European stock markets
moved into Asia on Thursday, with surges in several Australian
companies squeezing another batch of financial institutions that
have bet on the stocks falling.
    In Europe, where the trend has already shown up in a jump in
the value of Finnish technology company Nokia Oyj  NOKIA.HE 
 NOK.N , shares in the video game chain at the centre of the
U.S. action, GameStop  GME.N   GMEa.DE , dipped 16%.
    That move, roughly in line with an overnight fall in New
York and derivatives market changes, suggested at least a pause
in a dramatic rally that has seen GameStop jump as much as
1,700% in two weeks and fund investors lose billions.
 urn:newsml:reuters.com:*:nL1N2K22YX
    Driven by an army of small, individual investors who work
through online brokerage apps like Robinhood.com and discuss
stocks on anonymous social media messaging boards, the stock
surges drew more calls for regulatory investigation from
analysts and commentators on Thursday.
    "With small investors swarming over heavily shorted stocks
in what looked like a coordinated move, the frenzy raises all
sorts of questions with respect to possible market
manipulation," said Michael Hewson, chief market analyst at
retail broker CMC Markets UK.
    "It is already illegal for institutions to coordinate in the
manner currently being seen in moving prices on these stocks,
raising questions about the legality of what is currently taking
place right now on these forums."
    In the United States, the WallStreetBets forum on Reddit
that is seen as having fuelled the rallies briefly closed its
doors on Wednesday as membership jumped past 4 million.
    "We have grown to the kind of size we only dreamed of in the
time it takes to get a bad night's sleep," read a message from
the group's moderators after it reopened.
    "We've got so many comments and submissions that we can't
possibly even read them all, let alone act on them."
    Reddit said on Wednesday that it had not been contacted by
authorities over the surges.  urn:newsml:reuters.com:*:nL1N2K22BX
    Heavily shorted Australian stocks Webjet  WEB.AX , Tassal
Group  TGR.AX , Inghams Group Ltd  ING.AX  and InvoCare  IVC.AX 
all climbed on Thursday, while Sydney's benchmark ASX 200 index
 .AXJO  fell 2%.
    British publisher Pearson  PSON.L , drugmaker Evotec
 EVTG.DE  and commercial property firm Unibail-Rodamco  URW.AS ,
all big gainers in the past week, dipped in early deals.
    GameStop's U.S.-listed shares  GME.N  swung between small
gains and losses in volatile premarket trading, while AMC
 AMC.N , BlackBerry  BB.N  and Nokia  NOK.N  all slipped more
than 14% after recording hefty gains this week.
        
    GAME ON
    The war began last week when famed short seller Andrew Left
of Citron Capital bet against GameStop and was met with a
barrage of retail traders betting the other way. He said on
Wednesday he had abandoned the bet.  urn:newsml:reuters.com:*:nFWN2K2160
    Regarded by market professionals as "dumb money", the pack
of traders, some of them former bankers working for themselves,
have become an increasingly powerful segment of the financial
world.
    The only-way-is-up nature of stock markets over the past
decade, fuelled by a constant flow of newly created money from
major central banks, has also made it less risky to bet on
shares rising.
    The U.S. Federal Reserve signaled again on Wednesday it
would keep its taps open to spur a slowing economy.  urn:newsml:reuters.com:*:nL1N2K22XP
    This week's turmoil caught the attention of the White House,
with President Joe Biden's economic team - including Treasury
Secretary Janet Yellen on her first full day on the job on
Wednesday - "monitoring the situation."
    Massachusetts state regulator William Galvin called on NYSE
to suspend trading in GameStop for 30 days to allow a
cooling-off period.  urn:newsml:reuters.com:*:nL1N2K23NB
    "The prospect of intervention here is clearly high, but this
will just galvanize the (WallStreetBets) community as it just
brings home the feeling of inequality in financial markets,"
said Chris Weston, head of research at broker Pepperstone in
Melbourne.
    "It's fine to prop up zombie companies through Fed actions
but if retail follows a path that greatly distorts asset prices
by targeting short sellers, then this gets shut down."

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EXPLAINER-Why regulators may scrutinize GameStop's Reddit-driven
retail stock surge     urn:newsml:reuters.com:*:nL4N2K246P
TIMELINE-GameStop's 1,600% surge in retail investor vs hedge
fund battle     urn:newsml:reuters.com:*:nL8N2K2494
BREAKINGVIEWS-Short squeezers could end up strangling themselves
    urn:newsml:reuters.com:*:nL8N2K22TV
The big short: GameStop effect puts global bets worth billions
at risk     urn:newsml:reuters.com:*:nL1N2K217R
GameStop extends Reddit driven hyper-rally after Musk tweet   
 urn:newsml:reuters.com:*:nL4N2K12Y4
BUZZ-GameStop: Looks to double again as amateur investors drive
red-hot rally     urn:newsml:reuters.com:*:nL4N2K22IY
Europe's top shorted stocks soar on GameStop contagion   
 urn:newsml:reuters.com:*:nL8N2K22G4
U.S. state regulator says GameStop trading could be
'systemically wrong' - Barron's     urn:newsml:reuters.com:*:nL4N2K20QJ
Citron's Left is still short GameStop even as stock bounds
higher      urn:newsml:reuters.com:*:nL1N2K11U7
Hedge fund Melvin Capital has closed GameStop position
-spokesman     urn:newsml:reuters.com:*:nFWN2K20LX
BlackRock may have raked in $2.4 bln on GameStop's retail-driven
stock frenzy     urn:newsml:reuters.com:*:nL4N2K23QG
QUOTES-No let up in short squeeze, retail frenzy forces funds to
cover     urn:newsml:reuters.com:*:nL1N2K21PS
GRAPHIC: GameStock surge timeline    https://tmsnrt.rs/2KSQYX3
GRAPHIC: The short squeeze    https://tmsnrt.rs/3t1OlU8
EXPLAINER-How retail traders squeezed Wall Street for bets
against GameStop     urn:newsml:reuters.com:*:nL1N2K221Y
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Sagarika Jaisinghani, Nikhil Nainan and Sruthi
Shankar in Bengaluru, Saqib Iqbal Ahmed and April Joyner in New
York; and Thyagaraju Adinarayan in London 
Writing by Patrick Graham; Editing by Saumyadeb Chakrabarty)
 ((Sagarika.Jaisinghani@thomsonreuters.com; within U.S. +1 646
223 8780; outside U.S. +91 80 6182 2256;))