Shares in AMC Entertainment Holdings, Inc. and GameStop Corp. have skyrocketed this year. As retail traders pile in, short sellers are nursing deep wounds.
According to the latest data from S3 Partners, shorts have lost over $10 billion in both companies for the year. And their losses are accelerating:
The GameStop and AMC short-sellers had lost $6.18 billion and $3.37 billion by the end of trading on October 26th and by the end of trading on November 4th, these losses had extended to $6.51 billion and $3.69 billion, respectively.
This indicates that during the seven trading days in between, investors who had bet against both companies had lost $320 million each for $640 million in cumulative losses.
Most short sellers are hedge funds.
If those funds were making bets with their own money, I’d say that’s their business. But hedge funds’ assets generally come from pension plans and university and charitable endowments.
To gamble the future of education, charity, or people’s retirement betting against highly volatile stocks is reckless. Were I an investor in such a fund, I’d be withdrawing my capital immediately.
Meanwhile, the best performing funds are taking the opposite side of the bet.
Renaissance Technologies LLC, one of the best performing hedge funds in history, increased its ownership of AMC by 40% in the third quarter. And that’s after tripling holdings in the second quarter.
So who’s right? I have no idea.
But I do know that betting people’s retirement money against turbulent stocks is completely irresponsible.
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