Business & Investment

Reuters Reddit Rally Levels Wall Street

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© Reuters.File Photo: A statue of a girl facing Wall St. Bull can be seen in New York’s financial district

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By Matt Scuffham and Jessica Di Napoli

New York (Reuters)-Wall Street was thinking of a big win from Reddit-fueled retail frenzy on stocks such as GameStop (NYSE :) on Thursday, but many hedge funds in that rank had nursing losses.

GameStop’s stock with “power to the player” and other significantly deficient stocks such as AMC Entertainment (NYSE :), BlackBerry (NYSE :), Koss Corp, Express Inc, Reddit and others The media platform that soared this week as a social trader snapped them.

These deals fueled a rally that surprised even more, with hedge funds “shorting” stocks to cover their positions, costing billions of dollars.

But some of Wall Street’s top companies have revealed how they’ve benefited from the feeding frenzy, while others have come up with new deals to make a profit, so it’s flowing on Thursday. Has begun to change.

Silver Lake took advantage of a 301% stake in cinema chain AMC, which was struggling on Wednesday, to convert $ 600 million of convertible bonds into that stake.

This made Silver Lake a $ 284 million paper profit, but it wasn’t immediately clear how quickly private-equity firms could move to cash these stocks. .. AMC’s share price plummeted by more than 60% on Thursday.

Silver Lake did not respond to requests for comment.

More Wall Street companies are likely to try to cash the traded stock. BlackRock (NYSE :), the world’s largest asset manager, holds a 13% stake in GameStop and is now worth more than $ 2 billion, compared to $ 174 million at the end of December.

BlackRock did not respond to a request for comment.

Tuning model

Market makers such as brokerage firms and trading platforms are also set to benefit from the surge in trading volume.

Trading apps such as Robin Hood, Charles Schwab Stock option providers such as (NYSE :) and Citadel Securities LLC have all seen business surges as amateur traders and Wall Street investors drive trade.

And as the Reddit-fueled rally lost momentum on Thursday, several hedge funds that still had cash to invest were scrutinizing the market for a stock shortage.

Investors bet that by selling a company’s borrowed stock, it can “short” the stock, lower its price, and buy back the stock at a lower level to make a profit.

Some have purchased corporate credit in pole position to take over the company in the event of bankruptcy or debt restructuring.

One of the most popular transactions is to use the profits from shorting stocks to fund the purchase of company debt.

Others were trying to profit from volatility by trading price anomalies between a company’s stock and its liabilities.

“If you can get the securities, it’s very convincing to prolong credit and short stocks,” said one market source.

Insiders refer to the complex computer models used by sophisticated institutional investors and hedge funds to drive trading, saying, “Investors are licking their chops and recalibrating their models. “He added.

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Reuters Reddit Rally Levels Wall Street

https://www.investing.com/news/stock-market-news/power-to-the-players-wall-street-levels-up-in-reddit-rally-2402352 Reuters Reddit Rally Levels Wall Street

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