The fund that made $700 million on GameStop knew it was time to sell after an Elon Musk tweet

3 months ago

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One hedge money got the GameStop commercialized conscionable astir perfectly close past twelvemonth — buying it nether $10 and selling erstwhile the meme banal peaked.

The merchantability awesome it used? An Elon Musk tweet.

That's however 2021's top-performing hedge money Senvest Management was capable to notch $700 cardinal successful nett from GameStop and bring its yearly instrumentality to implicit 85%. The commercialized was the firm's azygous champion successful its 25 years successful existence.

"His piling connected with that tweet for america was…we each looked astatine each other, and thought however bash you apical that?," said Richard Mashaal, Senvest Management's founder, CEO and co-CIO. "And truthful for that, for us, that signified highest momentum and we proceeded to exit the remainder of our position." 

The Tesla CEO tweeted "Gamestonk!!" connected Jan. 26 aft the bell. The adjacent day, GameStop reached its apical astatine $347.51 apiece, erstwhile Senvest dumped its bet.

The meme banal saga started conscionable days into 2021 erstwhile retail traders teamed up connected Reddit's WallStreetBets' forum, aiming to bid up GameStop's shares, which were heavily shorted by hedge funds. The retail buying triggered massive abbreviated covering among hedge funds that fueled the rally adjacent further.

Mashaal decided to bargain shares of GameStop successful September 2020 amid a slew of expert merchantability ratings and unprecedentedly precocious abbreviated interest.

"It's a classical contrarian play for us," Mashaal said. "Wall Street doesn't contented precise galore merchantability recommendations and GameStop had plentifulness of those and precise few, if not, no, bargain recommendations. And then, of course, the abbreviated interest, which was implicit 100% of the shares outstanding .... So some of those would beryllium beauteous glaring indicators that this was a banal that was retired of favor."

Senvest is so an anomaly successful the hedge money manufacture wherever plentifulness of players got burned by the unprecedented abbreviated squeeze.

Melvin Capital was 1 of the biggest losers amid the meme banal mania. Its steep losses erstwhile prompted Citadel and Point72 to infuse adjacent to $3 cardinal into Gabe Plotkin's hedge money to enactment up its finances.  Melvin suffered a 39% loss successful 2021 aft the GameStop abbreviated squeeze.