Day traders are credited with triggering a revolution on Wall Street, helping to juice the stock of GameStop Corp. GME,
and AMC Entertainment Holdings AMC,
and shaking the base of some segments of the hedge fund industry in this process.
Now, a group of data providers is betting that financial markets will never be the same again and that deep-pocketed investors will spend a lot of money to monitor discussions on message boards such as Reddit’s r / wallstreetbets and social media platforms. such as Discord for mentions of listed companies.
“We think this is a kind of important and perhaps irreversible moment,” Boris Spiwak, marketing director at alternative data company Thinknum, told MarketWatch in an interview Monday. Thinknum’s plans were mentioned in a Barrron article over the weekend.
Spiwak said he sees customers using the services of companies like Thinknum as a way to take advantage not only of conversations on social media platforms, but also as a form of crisis management as individual investor gatherings gather. on platforms to unite with investment ideas.
“This is very new and we see it as a crisis management acquisition, as an insurance policy and a way to increase profitability and minimize losses,” he told customers.
The Thinknum service, which began last week, is one of the most expensive it offers customers, costing just under $ 25,000 a year, to track how many companies are listed on the New York Stock Exchange and those on the Nasdaq. . on sites like r / wallstreetbets or other Reddit sub-reddits.
“The demand has been massive – we have received over 100 requests from hedge funds in recent days,” wrote marketing director Thinknum.
So far, interest in these expensive products comes from fund managers, but the company says it is launching inquiries from institutional investors looking for “an insurance policy to protect themselves from Reddit.”
The movements of the alternative data company come as the video game retailer GameStop and other companies, such as the AMC Entertainment movie chain and the headset maker Koss Corp. KOSS,
they experienced a parabolic increase in stock values over a short period of time, while investors gathering on sites like Reddit’s r / wallstreetbets invested millions in heavily shortened companies to trigger a rally in those shares.
The recent advance on the very short-sighted actions targeted by the military by individual investors seems to be causing pain to hedge funds.
Melvin Capital Management, one of the hedge funds seen at the heart of the GameStop issue, lost 53 percent of its investment in January, The Wall Street Journal wrote, citing familiar people. The WSJ also said that another Maplelane Capital hedge fund ended January with a loss of about 45%.
Meanwhile, Andrew Left, the founder of Citron Research, on Friday, a famous short seller, changed his strategy, saying that his company will no longer publish short sales reports. Left has been seen drawing the wrath of individual investors for his negative views on GameStop – a brick-and-mortar retailer that he says is only worth about $ 20 amid a growing shift in digital video game sales.
“Young people want to buy shares. That is the spirit, ”Left said of his decision to leave the business of identifying companies he believes are overvalued and publicly announcing that he bets his shares will decline.
“They don’t want to cut stocks, so I’m going to help buy stocks,” Left said of his focus on long-term investments.
Other companies, including SimilarWeb, are also trying to promote tools for investors to track investments and discussions on popular social media sites and some of the popular trading platforms.
SimilarWeb says it can track stock market symbol searches among mobile app users and desktop users on the Robinhood Markets platform, for example. SimilarWeb says search activity can be indicative of real trading and can help customers identify trends early, according to Ed Lavery, director of investor solutions at SimilarWeb.
SimilarWeb
SESAMm, which is considered one of the leading providers of analytics and artificial intelligence for investment professionals, has developed or is working on services that could help identify social media trends, Spiwak said.
SESAMm, which recently raised about $ 7.5 million in venture capital funds from NewAlpha Asset Management and global investment firm The Carlyle Group, did not immediately return an email for comments.
Meanwhile, the liquidation of long profitable positions by hedge funds and other investors who needed cash to cover losses from the loss of short positions was blamed for DJIA Dow Jones Industrial Average,
the S&P 500 SPX index,
and Nasdaq Composite Index COMP,
recording the worst weekly losses since October last Friday.
Markets have been trying to pull back from these losses early Monday, starting what is likely a turbulent February.