In this podcast [24 min], which was recorded on Tuesday, Insightview has interviewed Jens Wiberg Larsson, Co-Founder and Portfolio Manager at St. Petri Capital in Denmark. The editor asks Jens why the "GameStop short-squeeze" in the United States is highly important for the financial market and the economy. St Petri Capital is a thematic long/short fund. Jens has more than 30 years of experience in managing equity funds and hedge funds in the last 13 years.
In January, the "mob" stormed Wall Street, which hit well-established hedge funds. They bet on the collapse of the brick-and-mortar video game retailer, GameStop. At one stage, hedge funds were short close to 140 per cent of the stock - more than the total outstanding stocks.
Apparently, young retail investors on social media decided that hedge funds should not be alone in deciding between "life and death" in the stock market. This triggered an unprecedented rally in the GameStop share price. This was not least channelled through the trading platform, Robinhood, which offers commission-free investing.
The GameStop share price increased by nearly 2000% forcing several hedge funds to unwind their positions due to margin calls - or they were forced to sell healthy long positions in large caps such as Apple and Microsoft to create liquidity. [Margin calls are the daily profit-loss payments related to the movements in the underlying position.] Their losses would have been even higher had it not been because several trading platforms, including Robinhood, made it harder to trade in January.
Insightview asks Jens Wiberg Larsson what the consequences of the Gamestop short-squeeze are and whether short-selling and "inexperienced" retail investors are healthy for the financial market. Insightview asks Jens why trading platforms such as Robinhood imposed limits on trading in the last few days? [Read also the article, GameStop turns little-known China firm Webull into No. 2 app in US.]
This interview was recorded on Tuesday, February 2, 2021.
Music: music-of-nature, Melodyloops, license
