Hedge fund Melvin Capital Management had shorted $400 million worth of Nintendo stock since May in anticipation of stock prices falling. Shorting a stock, for those who do not know, means borrowing shares, selling them for an immediate revenue, and then re-purchasing them after an expected fall to make a healthy profit.
It’s a common enough practice in the stock market, and Melvin Capital Management apparently anticipated Nintendo stock falling, and started shorting it in May- in turn driving some of the steep declines in stock prices that Nintendo shares have seen over the last few months. Melvin Capital doubled down on their position ahead of Nintendo’s earnings release earlier this week, presumably anticipating that the release, which was expected to report soft Switch sales for the quarter, would cause share prices to fall further.
That… isn’t what seems to have happened. Instead, Nintendo stock has gone up, defying all expectations, currently up by 7%, meaning that Melvin Capital could have paper losses of as much as $27 million, Bloomberg reports. However, they also add that, given the discrepancy in share prices between early May, when the short selling began, and yesterday, even after the soar, there is still a possibility that they came out in the black from all of this. For whatever that’s worth.
This continues the ongoing saga of people proclaiming Nintendo is doomed, and Nintendo stubbornly refusing to be doomed.