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1. The GameStop short squeeze in January 2021 saw the stock price rise over 50% as retail investors coordinated on Reddit to buy shares that hedge funds had heavily shorted, forcing them to close their positions at a loss. 2. Restrictions placed on GameStop trading by brokerages like Robinhood due to the volatility caused outrage among retail investors and lawmakers. 3. Other famous short squeezes include Volkswagen in 2008 when its stock rose to $999 due to hedge funds needing to exit short positions, and battles between investors like Bill Ackman and Carl Icahn over Herbalife in recent years.

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212 views8 pages

FM PPT First

1. The GameStop short squeeze in January 2021 saw the stock price rise over 50% as retail investors coordinated on Reddit to buy shares that hedge funds had heavily shorted, forcing them to close their positions at a loss. 2. Restrictions placed on GameStop trading by brokerages like Robinhood due to the volatility caused outrage among retail investors and lawmakers. 3. Other famous short squeezes include Volkswagen in 2008 when its stock rose to $999 due to hedge funds needing to exit short positions, and battles between investors like Bill Ackman and Carl Icahn over Herbalife in recent years.

Uploaded by

AMIT SINGH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

Short Selling and Short Squeeze

1. 18103101 Ashish Adhikari


2. 18103106 Bishwash Pokhrel
3. 18103124 Amit Singh
http://www.free-powerpoint-templates-design.com
GameStop Short Squeeze

• Stock price increases to


31.40$ per share more than • Citron research called out to investors as
• GameStop introduction
• Reported 30% reduction in net 50% rise. suckers which fueled more rage.
• Traded at nearly 4$.
sales YoY and 11% reduction in • The stance was shared by • The movement was backed by popular
• Initial conversation about
store base, however several other investors investors like Chamath Palihapitiya, Mark
investment opportunity
ecommerce saw 257% rise YoY. including Michel Bury. Cuban and Elon Musk.
sparked in r/wallstreetbets • The stock opened at 354.83$ per share in
• Operating at a loss of 67% in • Redditors posted
primary led by username
3rd quarter. screenshots of their earning Jun 27
called DFV.
• The stock was heavily • Stock price plunged by 20% that also fueled the
going to 13.66 per share movement.
shorted by big hedge funds
like Melvin capital and
citron research

Pretext 8th Dec 13th Jan 26th Jan 2021


2020 2021
GameStop Short Squeeze (Pt -2)

• Hedge funds cleared their


short position at huge loss. • SEC weigh in, claimed it will
• Robinhood and other trading
• Citron research released a act in protect retail investors
platform restrict transaction of
video admitting sale of against abusive trading
GameStop stock.
GameStop stock at 100% activities.
• Several lawmakers called
loss. • Trading of GME stock
against this restriction.
• Melvin capital also admitted reallowed.
loosing 53% of the total
investment.

27th Jan 28th Jan 29th Jan


2021 2021 2021
Other Famous Short Squeeze
Volkswagen
In 1931 on the process of being acquired by Porsche, hedge fund decided to short ordinary shares of Volkswagen leaving
6% ordinary share in free float and short sales of 12%. The panic for exit resulted in record stock price of €999 with
hedge funds reporting a loss of $30 billion. Due to the short squeeze Volkswagen became the most valued company of the
world

Herbalife.
Bill Ackman, a hedge fund manager, took a $1billion short position in Herbalife, a global multi-level marketing
firm. Herbalife doubled since Ackman’s bet, thanks to huge long bets taken by other billionaire investors such
as Carl Icahn, who became the firm’s largest shareholder. In a long-drawn battle of egos, which included a live
spat on CNBC, Icahn eventually prevailed, with huge gains, while Ackman’s fund reportedly took a loss of $1
billion.
Reliance
Dhirubhai Ambani was incensed when he realized a bear cartel was trying to profit by shorting Reliance
shares. Hence he decided to take on bear gang himself.
While the bear cartel had initial success in driving shares of Reliance down, a group called "Friends of
Reliance Association" was quick to purchase the shares that were being sold and supported the stock.
Eventually, when it was time to make good the delivery of the shares, it turned out that the bears had
nowhere else to go but Reliance or its friends. the stock exchange had to be shut down for three days
while the exchange authorities tried to bring about a compromise between the unyielding bull and bears
and caused an eventual loss of 3 crore.

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