Not All Hedge Funds Got Burned in the GameStop Rally, This One Made $700 Million


Hedge fund Senvest Management made $700 million on the GameStop rally in January while others got burned.

The massive rally was mainly driven by retail investors. However, Senvest Management had been investing in GameStop prior to it catching steam on popular subreddit WallStreetBets. By October 2020, Senvest owned more than 5 percent of the company. This was probably surprising for investors with holdings in Senvest since most hedge funds were shorting the stock.

Senvest's average cost per share was under $10 and the fund sold out when the stock price was over $400. In total, the hedge fund record a $700 million profit. The hedge funds that were shorting the stock lost an estimated $19 billion in January.

Senvest claims they invested in GameStop because of a presentation given by new CEO George Sherman and the inclusion of Chewy founder Ryan Cohen on its board of directors. However, in addition to the massive run-up in the stock's price, Senvest exited its position because of a tweet by Tesla founder and CEO Elon Musk. On January 26, Musk tweeted "Gamestonk!!"

Following the tweet, the stock surged another 157 percent when the market reopened the next morning. "Given what was going on, it was hard to imagine it getting crazier," Senvest CEO and fund manager Robert Mashaal said.

Since Senvest exited its position, GameStop shares have fallen to around $60.

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Economics, Finance and Investing