SOPA Images/Getty Images
- Short-sellers have lost over $5 billion in betting against GameStop as they battle Reddit traders.
- GameStop's stock dropped sharply on Thursday, but the damage has already hit hedge funds hard.
- Insider compiled a list of those hedge funds that got hit hard by the "Reddit army" short-squeeze.
Video-game retailer GameStop has dominated the headlines this week after its shares trebled in value in just three days this week, in a buying frenzy fueled by individual traders that have forced some of Wall Street's prominent hedge funds to close their bearish bets against the company with hefty losses.
GameStop's shares have hit record highs and the swarm of retail investors behind the rally have cheered each other on, primarily within the popular Reddit forum Wall Street Bets, which by Thursday, had around 3.5 million members.
Members have spent the past three weeks bidding up GameStop, which has sent the shares skyrocketed more than 1,200% since Wall Street Bets first piled in on January 11.
The higher the stock went, the greater the losses incurred by those that had previously bet against any price rises, as they were then forced to buy those shares back, whatever the cost. A number of high-profile hedge funds have already lost more than $5 billion so far this month, according to data from the financial-analytics firm S3 Partners.
"The stock trading mob ran out of runway with Tesla's stock and now they have turned their attention to other stocks, like GameStop," said David Trainer, CEO of New Constructs. "As fickle as the trading mob has been to select GameStop as one of their favorite stocks, they could be just as fickle as to when to let the stock drop," he said.
But the stock did drop around 64% on Thursday after retail trading app Robinhood restricted its trading along with other highly volatile stocks. The brokerage's curbs affected other stocks that hedge funds had previous shorted heavily, including AMC, BlackBerry, Bed Bath & Beyond, Express, Koss, Naked Brand, and Nokia.
These are the hedge funds that have lost out in their battle against the day traders: