Billionaire investor Loeb cuts bearish bets to avoid short squeezes-letter

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Billionaire investor Daniel Loeb has reduced the size of short bets on single named companies to limit the vulnerability of his hedge fund, Third Point, to short squeezes, he said in a letter on Tuesday.

"The short-selling environment is much more challenging than it has been historically," said Loeb in the letter. Analysing a company's economic prospects has taken a backseat to watching Reddit message boards and options expiries, the letter said.

A short squeeze occurs when a stock price rises so much that bearish bets become too expensive to hold and investors are forced to buy them back, sometimes at a loss. Loeb, who runs Third Point - which had around $12.6 billion in assets under management at end-February - said his top five winners this quarter included utility Pacific Gas and Electric

 

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