Earlier this year, anonymous members of the Reddit forum WallStreetBets, banded together to fuel epic gains in several stocks – local Blackberry, and now famous GameStop Corp, which is a parent company of the locally known brick and mortar game reseller EB Games.
Different members of the forum have different motives. Some of them just thought they found a powerful way to make money. For others, motives were much more personal making all of this seem like a David vs. Goliath kind of battle.
However, David Cimon, Assistant Professor at the Lazaridis School of Business and Economics at the Wilfried Laurier University, doesn’t see the story that way.
“There were some large hedge funds that were betting against these companies, who had these shares short for a long period of time, and who generally believed that these were going to go down,” Cimon says. “What doesn’t get baked into this is that there are funds on the other side of this.”
According to Reuters, Melvin Capital, one of the biggest funds betting on a drop in GameStop’s share price, lost 53 per cent in January when the stock price was forced higher by an army of retail investors using the Robinhood online trading app.
But there were winners too. Mudrick Capital posted its best month ever with a 9.8 per cent gain after a 11.2 per cent gain in 2020, a person familiar with the returns told Reuters. Mudrick is not a short seller and is seen as a hero to the retail crowd for having rescued AMC Entertainment with clever financing.
In the mix of it came the local Blackberry, but, according to Cimon, for a very different reason.
“Now Blackberry is a company that is focused on cyber-security-related things, electric vehicle operating systems … they sort of became attractive for something like this,” Cimon says.
Blackberry issued a statement that, “The Company is not aware of any material, undisclosed corporate developments and has no material change in its business or affairs that has not been publicly disclosed that would account for the recent increase in the market price or trading volume of its common shares.”
It seems that things have calmed down. The winners are counting dollars, while the losers are licking their wounds, until the next stock market frenzy.