There was a return of some of the 2021 dynamics of the meme stock short selling squeeze, with shares of GameStop and AMC soaring once again.
Mario Iachini, senior vice president at Vanda Research, told Yahoo Finance that hedge funds are more prepared to handle meme stock-related volatility, having learned their lessons after 2021, as reported by Quartz.
“Quant/hedge funds are much better equipped to handle these situations nowadays,” Iachini said. “If anything, we believe the chances that they participate along with retail in the squeeze but also lean against and then exit these trades ahead of retail traders are high.”
Within just two days, short-sellers as a whole lost more than $2 billion. They recovered about half of that after the stock began to sink days later, according to data from S3 Partners.
The quick drop-off in share price confirmed what Dan Egan, the head of behavioral finance at investment advisor Betterment, predicted: The current meme stock rally will be shorter-lived and more muted than the last.
“There might be a large body of meme stockholders who bought during the last rally looking to get out,” Egan said. “People with a losing stock will be motivated to sell as soon as they’re back to even, which will put some downward pressure on the price as it hits higher price points.”