Billionaire investor Carl Icahn is betting against GameStop stock

(Bloomberg) — Billionaire investor Carl Icahn has begun closing GameStop Corp . during the height of the meme craze around January 2021 and still holds a large position in the video game retailer, according to people familiar with the matter.

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Icahn began building the short when GameStop was trading near its peak of $483 a share and still has a big bet against the retailer’s stock, the people said, speaking on condition of anonymity because the matter is private. The investor, who has been increasing his positions from time to time, is betting that GameStop’s stock is not trading on its fundamentals and will continue to fall, the people said.

The size of his position is not clear.

GameStop fell 8.8% on Monday to close at $25.16, giving the retailer a market value of $7.7 billion. The retailer has gone through a four-for-one stock split this year and has lost 71% of its value since its January 2021 closing high.

Representatives for Icahn and GameStop declined to comment.

The early response to Icahn’s brief announcement on social media was relatively measured. News of the bet was shared on Reddit in at least two threads, including the popular WallStreetBets forum, garnering more than 250 comments as of 9:54 a.m. in Singapore. This pales in comparison to the thousands of responses to GameStop posts during the height of meme mania.

The stock wasn’t trending on social media platforms like it was in early September when news broke of its partnership with Sam Bankman-Fried’s now-defunct cryptocurrency exchange FTX US.

GameStop became an example of so-called meme stocks as retail boomed during the coronavirus pandemic, helped by fee-free trading apps and fiscal incentives. Individual investors egging each other on on Reddit forums poured money into GameStop in an attempt to burn through the money of managers betting against the retailer.

The effort, known as a short squeeze, resulted in several investors holding similar shorts to feel the pinch. That includes Melvin Capital, the hedge fund run by Gabe Plotkin, which said in May it was pulling out because of heavy losses on its bet against GameStop.

Short bets

This marks a rare instance of Icahn betting against meme stocks. Although the legendary investor has taken significant short hits elsewhere, including a bet on the collapse of malls through derivatives known as CMBX.

More than a fifth of GameStop’s publicly traded shares are currently shorted, according to data compiled by S3 Partners, more than double the level seen at this time last year. That compares to a peak of more than 140% in January 2021, when traders flooded Stocktwits chat rooms and used memes and GIFs to bet on forums like Reddit’s WallStreetBets.

That craze sent the stock skyrocketing even as gamers opted to download new titles instead of visiting stores, with the retailer saddled with more than $1 billion in debt and lease obligations at one point. After the craze, the company was able to sell millions of shares on the open market to help nearly wipe out its debt.

Many of the investors discussing their positions on social media platforms tout Ryan Cohen, the company’s chairman and largest investor and founder of pet retailer Chewy Inc., as a key driver in their investment.

–With help from Abhishek Vishnoi.

(Adds retailer’s social media response to Icahn’s position)

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