Andrew Left is no stranger to conflicts when it comes to investing. He makes a living by betting that companies will stumble and calls executives by name.
Companies and their supporters are fighting, but the criticism it normally receives is nothing compared to the poison released in recent days by stock traders who have rallied online to boost shares of an unlikely stock of momentum. , the GameStop retailer. Corp.
GME 137.62%
“It makes you feel vulnerable,” Mr. Left, 50, founder of Citron Research, said in an interview. “We live in a world where we are all exposed and people don’t understand the limits.”
Angry traders have shared their personal information, hacked Mr. Social media accounts. Left and have sent text messages to Mr. Left and his two children, using threatening, profane and personal language, according to people close to the subject.
Other short sellers have also signed up for these forums. Last week, there has been an increase in references to short sellers known as Mr. Carson Block. Left and Muddy Waters LLC on Reddit channels, blogs and other social networking sites, according to a Meltwater review,
a global media intelligence company.
Mr. Muddy Waters Block, who made his name short of Chinese stocks, said he has received death threats and other nasty ones in the past, though abuse has always seemed more domineering in the investment world than in politics. .
“People have always been much more pragmatic about their money than their political beliefs, allowing short-selling activists to have an audience with investors,” Block said. “Perhaps what happened to Andrew is an evisceration of this pragmatism that resembles the rabid deceptions you see in politics and elsewhere.”
Online forums like Reddit’s WallStreetBets are full of traders who boast of winning over the big investors who normally control the market. It’s an ironic twist, or a sign of their misunderstanding, that equates short sellers with the establishment of Wall Street.
Short sellers are marginal actors who go after companies and institutions that the rest of the financial world largely supports. They often make bets based on in-depth investigations, sometimes exposing fraud. Recent successes include companies like Nikola Corp.
, Phone card AG
and Valeant Pharmaceuticals International Inc.
But they are often rich. And in some cases, individual investors have been burned by their short-term sales campaigns. Nikola, for example, was a favorite stock of retail-driven traders.
Carson Block, of Muddy Waters, believes GameStop’s short squeeze will end badly for traders, who ignore the “investment lessons of the past”.
Photo:
brendan mcdermid / Reuters
This time, Mr. Left turned to GameStop, which soon became the subject of little pressure, where rising prices caused bearish investors to recover shares they had sold short to reduce their losses, making that stocks continue to rise. Traders have tripled the price of GameStop since Thursday, when Mr. Left made a live presentation, arguing that the shares would fall by 50%.
Fans of the company have ordered dozens of pizzas at home, well past midnight. Left even reached out to an online critic after asking him why he was making his Twitter account private. “We talked on the phone, it looked like he was 15,” Left said.
But Mr Left has also contacted the Federal Bureau of Investigation and the Stock Exchange Commission about the most cruel abuse and what he considers a collusion among investors. In a YouTube video posted Wednesday, Left said he has now closed most of his short position.
Current and former regulators say authorities have the means to repress online groups that come together to bomb stocks. There are several cases where authorities have successfully won cases against groups of investors who have acted together online to manipulate the price of a stock. In most cases, they have targeted those who spread false information online.
It is unclear whether what is happening online can now be considered manipulation. Many of the posters simply announce their intention to increase the shares 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 part of this activity. Just like when the SEC banned short-term selling in hundreds of companies in the midst of the financial crisis, it can take emergency measures that would make it difficult to trade options, which many traders use to take advantage of their profits and increase the actions.
According to Meltwater, the vitriol against Mr. Block, Mr. Left and Melvin Capital Management hedge fund Gabe Plotkin started heavily in the last ten days. Mr. Plotkin had a short position at GameStop.
Left has received most of the so-called negative feelings. Most online content comes from the United States, although users in China have also been an important part of the effort.
Left said traders ’attacks on him are a sign of the risks they take in trading options and buying stocks with markets close to all-time highs. The fact that so many investors are mired in the midst of the coronavirus pandemic puts even more people on the brink.
“It’s extreme capitalism that has gone wild,” Left says. “We are a nation of players.”
Block believes this will end badly for traders, who ignore “investment lessons from the past,” such as not pursuing costly stocks. Over time, he believes new investors will be burned. “Frenetic retail speculation always brings tears,” Block says.
Write to Gregory Zuckerman to [email protected] and Geoffrey Rogow to [email protected]
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