GameStop Mania Has Europe's Hedge Funds on the Run
Short sellers are scrambling to take some chips off the table after seeing the havoc wreaked by the frenzied buying of out-of-favor shares in the U.S.
Knowing when to fold.
Photographer: Luke Sharrett/BloombergThe trading frenzy that’s seen shares in video games retailer GameStop Corp. climb eightfold this month has burned investors who’d been betting against the stock. With the Robinhood crowd championing other unloved U.S. companies, hedge funds in Europe are growing wary of maintaining their positions in the most shorted shares here, producing violent moves that threaten to destabilize markets.
While the dynamic here is different, lacking the Reddit-inspired day traders who seem to be running U.S. stock markets, the effects are similar: Some of Europe’s most unfancied shares are jumping as short sellers take some risk off the table. Three examples follow.