Andrew Left is no stranger to conflict when it comes to investing. He wins his lifetime bet that companies will stumble and calls the directors by name.
Companies and their supporters are struggling, but the criticism it normally receives is nothing compared to the venom thrown up in recent days by stock traders who have gathered online to get shares of an unlikely boost stock. GameStop magazine Body.
GME 138.47%
“It makes you feel vulnerable,” he said in an interview. Left, 50, founder of Citron Research. “We live in a world where we are all exposed and people don’t understand borders.”
Angry shopkeepers shared their personal information, logged into Mr. Left’s social media accounts and texted Mr. Left and his two children, using threatening, profane and personal language, according to relatives.
Other short sellers were also 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 Carson Block from Muddy Waters LLC on Reddit channels, blogs and other social media sites, according to a Meltwater review.,
a global media information company.
Mr Block Muddy Waters, who made his name by shortening Chinese stocks, said he had received death threats and other abominations in the past, although abuse always seemed easier in the world of investors than in politics.
“People have always been more pragmatic about their money than their political beliefs, which allows short sellers to listen to investors,” Mr Block said. “Maybe what happened to Andrew is an evisceration of that pragmatism similar to the furious deceptions you see in politics and elsewhere.”
Online forums like RedSit’s WallStreetBets are full of traders who brag about 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 Wall Street headquarters.
Short sellers are marginalized players who pursue companies and institutions, and the rest of the financial world largely supports them. They often make bets based on in-depth research, sometimes exposing fraud. Recent successes include companies such as Nikola Body.
, 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 a favorite stock of retail-driven traders.
Muddy Waters’ Carson Block believes GameStop’s short-term stress will end badly for traders, who ignore “past investment lessons.”
Photo:
brendan mcdermid / Reuters
This time, Mr. Left targeted GameStop, which soon became the subject of a brief squeeze, in which rising prices forced rising investors to buy back the shares they had sold short to reduce their losses, further pushing the stock higher. up. Traders raised the price of GameStop three times on Thursday, when Mr. Stânga gave a live stream presentation claiming that the stock will decrease by 50%.
Fans of the company ordered dozens of pizzas sent home, well past midnight. Mr. Left even contacted an online critic after asking Mr. Left why he made his Twitter account private. “I talked on the phone, he looked like he had been for 15 years,” Mr. Left.
But Mr Stânga has also contacted the Federal Bureau of Investigation and the Securities and Exchange Commission about more violent abuses and what he considers to be collusion between investors. In a YouTube video posted on Wednesday, Mr. Left said he has now closed most of his short position.
Current and former regulators say authorities have the means to counter online groups that come together to pump stocks. There are several cases where the authorities have successfully won cases against groups of investors who acted together online to manipulate the price of a share. In most cases, they targeted those who spread false information online.
It is unclear whether what is happening now online could be considered manipulation. Many of the posters simply announce their intention to increase a larger stock and do not try to deceive other investors by making false claims.
Current and former regulators say there are mechanisms for the SEC to quickly limit some of this activity. Just as when the SEC banned short selling in hundreds of companies in the midst of the financial crisis, it can take emergency measures that would make it more difficult to trade options, which many traders use to make a profit and increase stock.
The vitriol against Mr. Block, Mr. Left and the Gabe Plotkin hedge fund of Melvin Capital Management started largely in the last 10 days, according to Meltwater. Mr. Plotkin had a short position in GameStop.
Mr. Left received most of the so-called negative feelings. Most of the online content comes from the US, although Chinese users have also been a big part of the effort.
Mr. Left said that traders’ attacks on him are a sign of the risks they take by trading options and buying stocks with markets close to historical highs. The fact that so many investors are co-opted in the midst of the coronavirus pandemic puts even more people on the sidelines.
“It’s an extreme capitalism that has gone crazy,” says Mr. “We are a nation of players.”
Mr Block believes this will end badly for traders, who ignore “past investment lessons” such as not pursuing expensive stocks. In time, he believes that new investors will be burned. “The frantic speculation of the retail trade always leads to tears,” says Mr Block.
Write to Gregory Zuckerman at [email protected] and Geoffrey Rogow at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8