Legendary investor Bill Miller’s investment management firm missed out on a potential $800 million windfall after having sold almost its entire holding inGameStop Corp.GMEbefore theJanuary short squeeze, according to areportby Business Insider.
What Happened: Miller Value Partners LLC initially bought 1.2 million shares in GameStop in early 2014 and boosted its stake in the videogame retailer to almost 1.7 million shares by the end of 2015, according to the report, citing regulatory filings.
The stake would have been worth about $808 million when GameStop’s shares surged to a 52-week high of $483 on January 28 this year. Based on the current stock price of about $160, the stake would have been valued at about $270 million.
However, Miller’s fund reportedly cut its stake in GameStop by 97% to about 32,000 shares in the first quarter of 2018. Samantha McLemore, Miller's co-portfolio manager of the Opportunity Equity strategy,saidat that time the fund exited GameStop as the stake had not paid off for years and in order to "avoid perpetual losers."
While the fund’s Income Strategy reportedly bought shares in the “secularly-challenged” GameStop in May 2019, it quickly sold those shares after the retailerscrapped its dividendand failed to announce a clear turnaround plan.
At the end of December 2020, Miller's fund owned 116,000 GameStop shares, just about 7% of the stake it held back in 2015, according to the report. The stake would be worth more than $18 million based on Friday’s closing stock price.
Why It Matters:Shares of heavily-shorted stocks such as GameStop,AMC Entertainment Holdings Inc.AMC 0.11%andRocket Companies Inc.RKThave seen extreme volatility this year as retail traders belonging to the Reddit Investor forum r/WallStreetBets bid up the stocks to create a short squeeze.
Shares of GameStop are seeing continued investor interest amid expectations the struggling brick-and-mortar retailer will adopt a digital business model led byChewy Inc.CHWYco-founder and major shareholder Ryan Cohen.
In contrast to Miller, Bill Gross, the co-founder of fixed income investment company Pacific Management Co., said in March that hemanaged to book a profitof about $10 million from the GameStop trading frenzy earlier this year.
Price Action:GameStop shares closed almost 7% lower on Friday at $158.36.
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