Who are the real winners in this Robinhood phenomenon? PART II

Finally, we show the price reaction with BlackBerry stock, which has been unable to maintain the high prices reached in Wednesday's frenzy to drop significantly (just as its trading volume dropped).

All of the above was a consequence of hedge funds betting against these stocks being forced to hedge their positions, costing them billions of dollars and adding fuel to the rally.

That was good for funds like the Fidelity Low-Priced Stock Fund. It held 2 million shares of GameStop, according to a recent filing, worth close to $1 billion at GameStop's peak price of $482.95 on Thursday. The stake would have been worth about $33 million in early January.

Large asset managers would also have benefited from securities lending to short sellers and others. This activity generated $7.66 billion in revenue globally in 2020, according to DataLend. Top asset manager BlackRock Inc has said its securities lending revenue hit a record in 2020.

As GameStop's price rose, so did the cost of borrowing its stock, in part because higher trading volumes made the shares harder to locate. GameStop borrowers now pay about 30% on an annualized basis, down from earlier this week, but up from about 7% in early December.

Another beneficiary of this week's rally was private equity firm Silver Lake, which took advantage of a 301% rise in distressed movie theater chain AMC's stock on Wednesday to convert $600 million in notes convertible into AMC shares.

Robinhoods' next target: silver.

Last Thursday, silver mining stocks soared and iShares Silver Trust, the largest silver exchange-traded fund, experienced an options buying frenzy after the market was listed as a target on Reddit forum r/wallstreetbets.



Retail investors exchanging tips on these information platforms caused massive changes in the prices of some stocks. Analysts consulted are confident that the influence of these investors will not last that long, and that ultimately, industrial and institutional demand will be the key factor in the long term.

Comments about the metal began appearing on Wednesday on the investor board that is now famous for driving GameStop Corp shares higher last week. They focused on long-held conspiracy theories alleging that the metal's price is suppressed by banks and the government to mask inflation.

We at AXL Capital think that if a new sell-off does occur, it will be fairly subdued, as a short squeeze in a mid-cap stock with a lot of short interest like GameStop is one thing, but commodity markets are extremely broad. We will see what happens if a short squeeze occurs in commodities, as it appears to be starting with silver.    

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