![]() It’s only in the past two years that the threat of getting squeezed by an internet mob has emerged. Short selling has always come with the threat that the bearish thesis won’t pan out or will take longer to play out than an investor can afford to wait. The company attempted to attract the meme spotlight last year, setting up a virutal event in an effort to appeal to the amateur crowd. seemed to capture the attention of meme traders on Wednesday, spiking as much as 68% when a record 57 million shares changed hands. Read more: Short Seller Andrew Left Lives in Fear of the Feds at His Doorĭistressed drugstore chain operator Rite Aid Corp. Justice Department launched a criminal probe into short selling by hedge funds and research firms with both the Securities and Exchange Commission and Justice Department going after hedge funds for running “short and distort” campaigns. The latest barrage from the Reddit crowd only adds to the peril for short sellers, a group of investors that often comes under fire for taking negative stances on companies. “The speed at which the crowd can assemble, target and move is unprecedented.” “The ability to have your price whipped around you, on the long or short side, is like never before,” says Peter Atwater, an adjunct professor of economics at William & Mary. But it’s come roaring back in recent weeks, as the AI-fueled tech rally started to spread to the broader marker and speculative furor kicked up. That strategy bore less fruit as the overall market turned south in 2022 and pros took extra care to mask their short positions. It was a time of excessive speculation, visible also in the froth around blank-check IPOs and the frenzy in digital currencies. One short seller after another was burned by the meme-stock crowd back in early 2021 as amateur investors banded together on forums like Reddit’s WallStreetBets to bet against Wall Street pros who had bearish positions in the likes of GameStop Corp. “While we have not abandoned short selling, we continue to reduce our single name short exposure in favor of market hedges and short baskets.” “Fundamental analysis is increasingly taking a back seat to monitoring daily option expiries and Reddit message boards, as evidenced by the numerous short squeezes and manipulations of heavily shorted stocks such as AMC and Gamestop in 2021 and others this year,” Third Point LLC’s chief executive wrote.
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