The short squeezes in AMC Entertainment Holdings Inc. AMC and GameStop Corp. GME have ensured that hedge funds will not get out “over their skis” the way Archegos Capital Management did, according to Keith Bliss, a former NYSE trader and president of fintech solutions provider Capital2Market.
What Happened: The whole short-squeeze episode shows that retail investors have emerged as the bigger players, Bliss told Yahoo Finance. He also dubbed 2021 as “the year, the era, of the retail investor.”
Bliss noted that institutional investors now monitor chatrooms and forums like Reddit’s r/WallStreetBets to see which stocks are receiving high interest from retail investors.
Why It Matters: Retail investors have shown short sellers and hedge funds that they are now a force to reckon with, Bliss noted.
These investors drove up the stock prices of heavily shorted stocks like AMC Entertainment and GameStop earlier this year. This resulted in huge losses for short sellers who bet against these stocks.
Melvin Capital, which was at the heart of the GameStop saga, reportedly ended the first half of the year with a loss of 46% as the hedge fund struggled to rebound from the heavy losses it incurred from betting against stonks – stocks popular with retail investors.
It was reported in June that London-based hedge fund White Square Capital – another GameStop short seller - was shutting down after it suffered huge losses during the short squeezes earlier this year.
Price Action: AMC Entertainment shares closed almost 2% lower in Thursday’s trading session at $38.13, while GameStop shares closed 2.5% lower at $164.86.
Photo by JAH2k on Wikimedia
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