Amid GameStop and AMC frenzy, Citron Research discontinues reports on short selling

Wall Street: Short selling and short squeezes explained

In most cases, profits are made in the stock market as the price of a share rises. But short sellers can make money as value drops and lose money as it rises.

It’s too soon to tell what will become of the Wall Street frenzy that has sent shares of GameStop and AMC soaring to 52-week highs, but at least one investment firm has committed to changing its ways.

Andrew Left, the founder of Citron Research, announced on Friday that his firm will be discontinuing the practice of providing short selling reports.

When an investor is short, they believe the price of a share will drop. Being listed on a short report could prove detrimental to a business.

"After 20 years of publishing Citron will no longer publish ‘short reports,’" Citron Research said in a tweet. "We will focus on giving long side multibagger opportunities for individual investors."

In the stock market, a short seller is an investor who aims to profit as the price of a company’s shares decrease. The profit is limited to how far the share price is from $0.

However, should the price rise, the investor’s losses could be infinite. This is known as a short squeeze, and it’s what threw Wall Street into a frenzy this week.

A group of retail investors on Reddit learned that many investment firms were short on struggling businesses — like GameStop, AMC, Nokia, Black Berry and Bed, Bath & Beyond.

The retail investors encouraged others to load up on shares, driving the prices higher and preventing the investment firms from profiting.

The GameStop sign seen inside the Susquehanna Valley Mall. An online group sent share prices of GameStop (GME) and AMC Entertainment Holdings Inc. (AMC) soaring in an attempt to squeeze short sellers. (Photo by Paul Weaver/SOPA Images/LightRocket via

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The prices grew so high, Citron closed out of most of its positions at 100% loss. Closing out of a position involves buying a large number of shares, which caused the price to grow even higher, padding the profits of the shareholders.

Left said he started Citron 20 years ago with the intention of protecting the individual against Wall Street.

"Where we started, Citron was supposed to be against the establishment," Left said in a YouTube video. "We’ve actually become the establishment."

On Thursday, trading platforms like Robinhood restricted volatile stocks like GameStop and AMC to "liquidate only." Since investors could no longer buy, the prices plummeted.

This move outraged many investors, prompting bipartisan attention from Congress and multiple lawsuits.

The trading platforms have since relented on the restriction, sending shares higher on Friday. Robinhood, however, continues to limit the number of shares investors can buy in these companies.

This story was reported from Atlanta.