Short Selling Declines In GameStop and Other Robinhood Stocks
February 02 2021 - 8:10AM
Dow Jones News
By Anna Hirtenstein
Short sellers have backed away from nine of the 13 stocks that
Robinhood limited trading on in recent days.
The percentage of GameStop shares that are being lent, a proxy
for short interest, declined to less than 28% of shares outstanding
on Monday, down from a monthly peak of 81% about two weeks earlier,
according to data from IHS Markit. For AMC Entertainment it fell
below 12%, almost two thirds down from the level it was at on Jan.
20.
An investor shorting a stock makes money if the price goes down
and loses money if it goes up. Robinhood restricted buying on a
list of volatile stocks and options starting Thursday, as it dealt
with a $3 billion deposit request from its clearinghouse
(https://www.wsj.com/articles/robinhood-needed-3-billion-to-shore-up-volatile-trading-in-gamestop-other-stocks-11612180694).
Robinhood has progressively loosening trading restrictions of
these stocks, increasing the number of GameStop shares that its
users can buy to 20 on Tuesday
(https://www.wsj.com/livecoverage/gamestop-amc-silver-stock-market/card/23goHt01usEieeqObnEP),
up from a single share on Monday.
The volatility in these shares has been high enough for some
investors to rethink shorting single stocks as a strategy,
according to Lorenzo Di Mattia, chief investment officer of hedge
fund Sibilla Capital.
"They can go up 300, 400% or more, so it's very hard to have a
portfolio where you even have a relatively small position. The
downside on a short position is too big, it's a new reality," said
Mr. Di Mattia. "GameStop has obviously had crazy moves and it's not
even close to an acceptable volatility, it's just insane."
It's not all one way, however. Short interest has been ticking
up for BlackBerry, Koss, Express and Nokia's U.S.-listed shares in
recent days, albeit from much lower levels, data from IHS Markit
showed. On Monday short-interest was at 4% for BlackBerry and Koss,
close to 20% for Express and 1.5% for Nokia.
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(END) Dow Jones Newswires
February 02, 2021 07:55 ET (12:55 GMT)
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