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Matt Levine

Who’s Winning the GameStop Game?

Hedge funds, Roaring Kitty, a price update and Robinhood skill.

I wrote yesterday that what I really want to read right now are accounts of how hedge funds made decisions when confronted with the weird price action in GameStop Corp. stock in the last couple of weeks. Clearly some hedge funds were trading the stock in incredibly choppy Reddit-driven markets, and I just want to know what they were thinking. Did they have some sort of robust tested process for trading based on momentum or social-media sentiment or technical factors, and coolly apply that process to the craziness around GameStop? Or were they distressed-credit or global macro funds who were like “this is too crazy, I cannot resist a trade like this”? 

The Wall Street Journal came through in a big way with this story about Senvest Management LLC, a (now) $2.4 billion equity hedge fund that made almost $700 million on GameStop. Their process for deciding how to buy GameStop was sort of boring and normal and pre-nonsense: They got interested in the stock after hearing “a presentation from the new GameStop chief executive at a consumer investment conference in January 2020,” did research, “spoke with management, sussed out competitors and noted the involvement of activists in the stock.” It took them until September to start buying, and “by the end of October, Senvest owned more than 5% of the company, paying under $10 a share for the bulk of the stock.”