Activist investor Carl Icahn has a sizeable short position in video game retailer Gamestop Corp, Bloomberg News reported, citing sources familiar with the matter.
Gamestop, which is among the so-called “meme stocks”, was popular among retail investors during the pandemic in what came to be known as the “short squeeze” – where investors, egging each other on in Reddit forums, ploughed money into Gamestop in a push to burn short-sellers – money managers who bet against the retailer.
Short-sellers borrow shares and sell them, seeking to profit by returning them after buying the stock back at a lower price.
Mr Icahn began shorting the stock around January 2021 when Gamestop was trading near its peak of $483 (€470) a share and still holds a large bet against the retailer’s shares, said the people, asking not to be identified because the matter is private. The investor, who has added to his position from time to time, is betting that Gamestop’s stock isn’t trading on its fundamentals and will continue to fall, the people said.
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The current size of his position isn’t clear. It marks a rare instance of Mr Icahn betting against meme stocks although the legendary investor has taken sizeable shorts elsewhere, including a bet on the downfall of malls through derivatives known as CMBX.
The stock, which has lost nearly a third of its value so far this year, fell about 9 per cent on Monday before recovering just over half of that in early trading on Tuesday.
Short interest in Gamestop’s stock is very high, with 17.53 per cent of the company’s outstanding shares shorted as of October 31st, according to Refinitiv data. In comparison, short interests in Apple, the world’s largest public company, and Tesla, the world’s most valuable automaker, are 0.65 per cent and 2.43 per cent respectively, according to Refinitiv data.
In September, Gamestop announced a partnership with Sam Bankman-Fried’s FTX US to increase its presence in the cryptocurrency space even as analysts said the partnership was “unlikely to yield meaningful revenue or profit”. Earlier this month, FTX filed for bankruptcy protection in the US in the biggest crypto industry blow up till date.
The retailer executed a four-for-one stock split this year.
Icahn Enterprises did not immediately respond to a Reuters request for comment.
The Gamestop short squeeze led to several investors who held similar shorts to feel the pinch. That included Melvin Capital, the hedge fund run by Gabe Plotkin, which said in May it was folding due to heavy losses from its bet against Gamestop.
The retailer executed a four-for-one stock split this year and has lost 71 per cent of its value from that January 2021 closing high. – Reuters / Bloomberg
