Why Billionaire Carl Icahn Is Betting Against GameStop (GME) Stock

  • Carl Icahn is reportedly shorting Gamestop (GME).
  • Gamestop lost money in the third quarter and abandoned its gift cards tied to FTX.
  • Icahn’s patience may outlast the meme traders in GME stock.
GME stock - Why Billionaire Carl Icahn Is Betting Against GameStop (GME) Stock

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GameStop (NYSE:GME) is back in the news because investor Carl Icahn reportedly has a big short position in it. GME stock became a meme trade in early 2021 as small investors rushed to its rescue in reaction to a short squeeze by hedge funds.

Icahn, now 86, was a corporate raider in the 1980s but stopped managing money for outside clients in 2011. His Icahn Enterprises (NASDAQ:IEP) is based near Miami Beach, FL, and is down about 1.7% so far in 2022 with a market capitalization of $17 billion.

Meme Over?

Former Chewy (NYSE:CHWY) co-founder Ryan Cohen became a hero to small traders on Reddit’s r/WallStreetBets in early 2021, leading them against short sellers in GameStop. He eventually took it over. But he lost his halo earlier this year after abandoning his position in Bed, Bath & Beyond (NASDAQ:BBBY) without telling his followers.

After Icahn’s continuing position in GameStop became known, an r/WallStreetBets post emerged of the Bloomberg story placed next to a picture of Cohen and Icahn taken in October. The story noted GameStop is down 76% from its meme stock high, and that Icahn has been shorting the stock since that high. GameStop lost 8.5% of its value on Nov. 21 but recovered slightly in overnight trading. It opened Nov. 22 at about $25 per share.

On Stocktwits, users talking about GameStop showed little support for the stock and some support for Icahn. In September, GameStop reported a loss of $108.7 million, or 36 cents per share, for the quarter ending in July on revenue of $1.136 billion, down from the previous year.

Under Cohen, GameStop has made a run into collectibles and cryptocurrency. It recently offered refunds on gift cards tied to FTX, the failed crypto trading firm. It still has a non-fungible token (NFT) marketplace.

GameStop remains a short squeeze candidate with 53 million of 304 million shares, or 21% of the public float, being held short according to Fintel. Almost 64% of the shares are still held by small traders.

What Happens Next for GME Stock?

If Icahn has been short all the way down, it shows tremendous patience and good timing since he went short at the top. Time, it seems, is the ally of the shark, not the minnow.

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.

Article printed from InvestorPlace Media, https://investorplace.com/2022/11/why-billionaire-carl-icahn-is-betting-against-gamestop-gme-stock/.

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