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A GameStop store in San Rafael, Calif., on Dec. 8, 2021.Justin Sullivan/Getty Images

The wild trading in shares of GameStop GME-N in early 2021 created one of the biggest paydays in history for an executive of a Canadian public company.

Richard Mashaal, a vice-president of little-known Montreal-headquartered investment company Senvest Capital Inc., SEC-T received just under $152-million last year. The compensation included a cash bonus of $53-million and an $82-million cut of trading profits, much of it from a wildly successful bet on GameStop.

While a small number of Canadian executives have previously made more than $100-million in a year, their compensation packages were largely made up of stock awards, which can fall in value over time. Mr. Mashaal’s 2021 pay, by contrast, was paid in cash and interests in the funds he manages.

The disclosures also provide a window into the outsized rewards on Wall Street when hedge funds make large bets that turn out much better than expected.

Handful of hedge funds bet big on GameStop before its wild ride

Victor Mashaal, Richard’s father and Senvest’s chairman and president, started the company in 1968 as the Canadian distributor of Sensormatic electronic surveillance systems. By the 1990s, it had ditched that business in favour of real estate and stock investing.

Today, it makes investments and plays an advisory role to three hedge funds. The TSX-listed stock rarely trades more than a few hundred shares a day. Richard Mashaal runs Senvest Management LLC. out of Madison Avenue offices in New York City. Together, he and Victor own about 56 per cent of Senvest Capital, a stake worth about $485-million at Friday’s closing price.

In its filings with Canadian and U.S. regulators, Senvest said it bought a stake in GameStop in late 2020 as one of its typical value investments. (The company’s outside communications agency declined to provide comment beyond the filings.)

Senvest believed a new board and management team that joined GameStop in 2019 was making meaningful changes, and that an activist investor who had recently announced a position in the game retailer could be a catalyst for even more. And the company thought analysts were underestimating potential profits GameStop could accrue as game console makers released new models.

Senvest acknowledged in its filings that it was also acutely aware that GameStop was likely the most shorted stock in all of the United States. Short sellers borrow shares of a stock, sell them, and hope to profit when the shares fall in price by repurchasing them at the lower value and paying back the share-based loans.

But when a shorted stock rises sharply, it creates a “squeeze,” because the short sellers often need to buy shares back quickly at the higher prices to “cover” their loans.

“In the entirety of all our careers, we had never seen such a level of short interest,” Senvest explained in its filings. “From what we could tell, the short thesis was that all videogames would be distributed digitally and that GameStop would go bankrupt. Our research indicated that GameStop faced little risk of bankruptcy.”

A potential short squeeze “created a non-trivial chance of a huge upside move,” Senvest said.

That’s exactly what happened to GameStop and Senvest.

Senvest’s disclosures say it owned 3.6 million shares, or 5.54 per cent of GameStop, as of Oct. 7, 2020, and that it bought “the core” of its investment in 2020′s fourth quarter. In those first seven days of October, GameStop shares traded between US$9.10 and US$10.25.

Senvest bought more than 1.4 million additional shares by the end of 2020. It didn’t disclose purchase prices, but GameStop largely traded between US$10 and US$20 during that time.

At around this time, individual investors on Wallstreetbets, an online community hosted by Reddit, began sharing memes that encouraged others to buy heavily shorted stocks. The campaign escalated into what seemed like a crusade to punish short sellers by causing those stocks to rise rapidly in value. In the first months of 2021, “meme stocks,” including Canada’s BlackBerry, rose rapidly and often fell just as hard.

“We did not foresee the unusual catalyst for the short squeeze which occurred in GameStop starting on Jan. 25,” Senvest wrote in its filings. “Reddit’s ‘Wallstreetbets’ participants effectively crowdsourced the short squeeze that sprang the coiled spring.”

Senvest did not disclose exact selling prices, but said it “trimmed” its GameStop position on Friday, Jan. 22, a day when the stock traded between US$42.32 and US$76.76.

Senvest began to sell again in the early pre-market hours of Monday Jan. 25 and “exited roughly half of the position on that day.” At that point, GameStop was trading between US$61.13 and US$159.18. That “provided us with an extraordinary gain from which we had the flexibility to ‘play with the house’s money’ and to see where the stock could go,” the company said.


On Jan. 26, a tweet from Chamath Palihapitiya, whom Senvest described in its filings as a “social media business darling” sent the stock’s price higher. GameStop traded between US$80.20 and US$150.00 that day. Senvest said it “sold more.”

“Finally, after the market close on that same Tuesday, the titan of all business social media, Elon Musk, who has a particular disdain for short sellers who he has regularly battled publicly, tweeted a single word – ‘Gamestonk!’ – which sent GameStop investors into a frenzy,” Senvest wrote. “We believed that things couldn’t get any better than that in terms of the immediate term trading mania, and as a result, we sold our remaining GameStop shares in the post-market trading hours and into Wednesday, Jan. 28 regular trading.”

GameStop traded between US$249.00 and US$483.00 during that period.

Senvest said the GameStop investment provided “over 35 per cent” of the company’s $2.42-billion gain in holdings in 2021, or at least an $848-million pretax gain on a single position, held for roughly four months. The Senvest Master Fund returned 66.9 per cent for 2021′s first quarter, and 86.2 per cent for the year.

The company, which had reported $212-million in net income in 2020 – just its second year ever over $200-million, according to S&P Global Market Intelligence – posted $733-million in profits for 2021.

While the GameStop impact on Senvest’s profits had been known for some time, its effect on the company’s compensation was only revealed prior to its annual meeting of shareholders last month.

Senvest Capital has a compensation plan that sets aside 3.5 per cent of the company’s pre-tax profits as a bonus pool. And it adds another 3.5 per cent if the company’s investment portfolio beats a benchmark by a wide enough margin – which it did easily in 2021.

That created a bonus pool of $59-million, of which Richard Mashaal received $53-million. (Victor Mashaal received $5.6-million, and a third person received the remaining $400,000.)

In addition, an entity owned by Mr. Mashaal receives a management fee from three funds in which Senvest has invested. His take from that was $15.67-million.

And investors in the Senvest funds pay 20 per cent of their profits to the managers. Mr. Mashaal received $82.64-million from profit-sharing. In an email after publication of this story, Senvest chief financial officer George Malikotsis said the profit sharing was paid through an allocation of additional interests in the funds Mr. Mashaal manages.

Senvest Capital, the publicly-traded company, said it does not consider the $82.64-million part of Mr. Mashaal’s compensation because it is paid by the investors in the funds directly to him. Prior to 2021, however, Senvest did include the profit-sharing money in the totals in its annual compensation disclosure.

Including that profit-sharing, Senvest reported total compensation for Mr. Mashaal of $31.67-million in 2020, $7.59-million in 2019, and $6.22-million in 2018.

Editor’s note: An earlier version of this story said that all of Richard Mashaal’s compensation was paid in cash. Senvest says $82.64-million in profit-sharing was paid not in cash, but in an allocation of additional interests in the funds Mr. Mashaal manages.

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