Andrew Left is no stranger to conflict when it comes to investing. He makes a living betting that companies will stumble, and he calls out executives by name.
Companies and their supporters fight back, but the criticism he normally gets is nothing compared with the venom spewed in recent days by stock traders who have come together online to drive up shares of an unlikely momentum stock, mall retailer GameStop Corp. GME 103.13%
“It makes you feel vulnerable,” Mr. Left, 50, founder of Citron Research, said in an interview. “We live in a world where we’re all exposed and people don’t understand boundaries.”
The angry traders have shared his personal information, hacked into Mr. Left’s social-media accounts and texted Mr. Left and his two children, using threatening, profane and personal language, according to people close to the matter.
Other short sellers have also been targeted in these forums. In the past week, there has been an uptick in references to well-known short sellers like Mr. Left and Muddy Waters LLC’s Carson Block on Reddit channels, blogs and other social-media venues, according to a review by Meltwater, a global media intelligence company.
Muddy Waters’ Mr. Block, who made his name shorting Chinese stocks, said he has received death threats and other nastiness in the past, though the abuse always seemed tamer in the investing world than in politics.
“People have always been much more pragmatic about their money than their political beliefs, which allows activist short sellers to get a hearing with investors,” Mr. Block said. “Maybe what happened with Andrew is an evisceration of that pragmatism that’s similar to the rabid delusions you’re seeing in politics and elsewhere.”
Online forums like Reddit’s WallStreetBets are full of traders boasting that they are beating up the big investors who normally control the market. It is an ironic twist, or a sign of their lack of understanding, that they equate short sellers with the Wall Street establishment.
Short sellers are fringe players who go after companies and institutions the rest of the financial world is largely backing. They often make bets based on deep research, sometimes exposing fraud. Recent successes include firms like Nikola Corp. , Wirecard AG and Valeant Pharmaceuticals International Inc.
But they are often rich. And in some cases, individual investors have been burned by their short-selling campaigns. Nikola, for example, was a favorite stock of retail momentum traders.
This time, Mr. Left targeted GameStop, which soon became the subject of a short squeeze, where rising prices prompt bearish investors to buy back shares they had sold short to cut their losses, pushing the stock higher still. Traders have driven the price of GameStop up threefold since Thursday when Mr. Left held a live stream presentation arguing the stock would fall by 50%.
The company’s fans have ordered dozens of pizzas sent to his home, well past midnight. Mr. Left even reached out to one online critic after he asked Mr. Left why he made his Twitter account private. “We spoke on the phone, he sounded like 15 years old,” Mr. Left said.
But Mr. Left has also contacted the Federal Bureau of Investigation and the Securities Exchange Commission about the more vicious abuse and what he sees as collusion among the investors. In a YouTube video posted on Wednesday, Mr. Left said he has now closed most of his short position.
Current and former regulators say that authorities do have means to crack down on online groups that band together to pump stocks. There are several cases where authorities have successfully won cases against groups of investors that have acted together online to manipulate a stock’s price. In most cases, they have targeted those that spread false information online.
It is unclear whether what is happening online now could be considered manipulation. Many of the posters are simply announcing their intention to drive a stock higher, and not attempting to deceive other investors by making false claims.
The current and former regulators say that there are mechanisms for the SEC to quickly limit some of this activity. Much like when the SEC banned short selling in hundreds of companies at the height of the financial crisis, it can take emergency measures that would make it harder to trade options, which many traders are using to juice their returns and drive the stock higher.
The vitriol against Mr. Block, Mr. Left and hedge fund Melvin Capital Management’s Gabe Plotkin largely began in the past 10 days, according to Meltwater. Mr. Plotkin had a short position in GameStop.
Mr. Left has received the majority of so-called “negative” sentiment. Most of the online content has stemmed from the U.S., though users from China have also been a large part of the effort.
Mr. Left said the traders’ attacks on him are a sign of the risks they are taking by trading options and buying into stocks with the markets near all-time highs. The fact that so many investors are cooped up amid the coronavirus pandemic puts even more people on edge.
“It’s extreme capitalism gone wild,” Mr. Left says. “We’re a nation of gamblers.”
Mr. Block believes this will end badly for the traders, who are ignoring the “investing lessons of the past,” such as not chasing expensive stocks. In time, he believes the new investors will be burned. “Frenzied retail speculation always leads to tears,” says Mr. Block.
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