They’ve been labelled the Reddit army. A loose collection of retail investors linked through social media apps like WallStreetBets. And in recent weeks they’ve shown just how much money and influence their united front can bring to bear in global share markets.
The targets have largely been institutional short sellers. Hedge funds who take positions against a company’s shares. Meaning they make money when the share price goes down… and lose money when the share price goes up.
If the share price goes up a lot, short sellers are often forced to cover their positions. That can see them buying back the shares they borrowed and sold, creating even more demand for the shares and driving the price even higher. You’ll hear this called a short squeeze.
While much of the action has centred on US markets – think GameStop Corp (NYSE: GME) – the ASX-listed Unibail-Rodamco-Westfield (ASX: URW) share price has also been swept up in the Reddit army’s assault on short sellers.
How the Reddit army is driving the Unibail share price
The Unibail share price is falling hard today, down 5.6% in late morning trade. That compares to a 1.2% gain on the S&P/ASX 200 Index (ASX: XJO)
But the last 3 trading days were a very different story. Unibail’s share price gained 14.5% on Thursday, and by the closing bell yesterday it was up 18.5% from Wednesday’s closing price.
The impetus behind the sharp rally appears to lie largely with the Reddit army targeting short sellers of the retail chain, including US hedge fund D1 Capital.
According to the Australian Financial Review:
European market disclosures that require funds to reveal their short bets showed three D1 Capital entities had a collective 7.84 per cent short interest in URW’s Paris- and Amsterdam-listed shares.
Short-selling volumes increased by eight times the average daily volume on Friday to 1.8 million shares for the ASX-traded security.
A global scramble to cover, traders say, contributed to the share price spike.
Short sellers can and do make money at times. But the risk is high. While the most you can lose by going long on a stock (buying shares) is what you pay for it, the losses for short selling are theoretically unlimited.
Invest with care.
Unibail-Rodamco-Westfield company snapshot
Unibail is one of Europe’s largest commercial real estate companies, owning a portfolio of quality retail and office complexes. It has assets in Europe, the United Kingdom and the United States.
Unibail acquired Australian shopping centre operator Westfield Corporation, created by the split of Westfield Group, in 2018. This saw Unibail shares first listing on the ASX as Unibail-Rodamco-Westfield.
Over that past 12 months, the Unibail share price remains down 49%.