Short-sellers are nursing estimated losses of $19 billion in 2021 after betting GameStop's share price would fall

John Minchillo/AP

  • Short-sellers have lost around $19 billion on GameStop in 2021, new estimates suggest.
  • Reddit day traders have sent the stock soaring by more than 1,500% this year.
  • GameStop’s rise has hammered hedge funds including Melvin, Point72 and D1.
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Hedge funds and other institutions shorting GameStop stock are sitting on losses of around $19 billion as of Friday, according to new data shared exclusively with Insider.

Figures from data provider Ortex showed investors who had bet the share price would fall have been massively squeezed, with losses topping $10 billion on Wednesday alone, when GameStop soared 135%.

Members of the Reddit forum Wall Street Bets have gone to war with hedge funds such as Melvin Capital this week over the US video-game store.

Forum members have banded together to drive up GameStop stock by more than 1,500% over the last month, with seemingly little business basis.

Read More: A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street – and shares her 4-part advice for navigating the frenzied trading environment

The rise has dramatically “squeezed” investors who were betting that the price would fall. As the price has soared, short-sellers have been forced to “cover” their positions by buying back stock at a huge loss.

“The long and the short of it, hedge funds are hurting,” said Eleanor Creagh, market strategist at Saxo Bank. “The problem from here [is] whether the initial bout of deleveraging causes a chain reaction of squeezed positioning.”

When the GameStop price soared on Wednesday, investors’ paper losses rose by around $10.2 billion, Ortex’s data showed. But as the price tumbled yesterday, short-sellers regained some ground, with estimated gains of $5.95 billion.

Overall, Ortex estimated that short-sellers were on track for losses of around $19.04 billion as of Friday, with the GameStop share price up 78% to around $345 by just before 11am ET.

The losses are yet to be realised, however, and are estimates based on data provided by lenders, brokers and dealers. But they give a sense of the enormous scale of the hit to hedge funds and other short-sellers.

Read More: As Redditors flood the stock market, UBS breaks down 6 options strategies investors can use right now to protect their portfolios

Melvin Capital and Citron Research both said this week that they had closed their short positions, but did not disclose any losses incurred. 

Ortex estimated that the number of GameStop shares being shorted fell from around 79,000 on January 13 to fewer than 39,000 as of Thursday.

Steve Cohen’s $19 billion hedge fund Point72 has lost nearly 15% this year during the GameStop frenzy, according to the New York Times. And Bloomberg reported $20 billion D1 Capital Partners had lost around 20%.

Data from Ortex released on Thursday showed short-sellers were sitting on losses of around $70 billion due to their overall short positions on US firms so far this month.

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