A small Los Angeles fund borrowed fourteen Pikachu figures from the LEGO Pokémon queue and sold them, betting the pop-up peaks before Dallas.
The LEGO Pokémon SMART Play Experience in Los Angeles ran out of gift bags, and a local fund read it as a top. It borrowed fourteen Pikachu figures from the queue and sold them short. LEGO wants them back in original condition.
The gift shop at the LEGO Pokémon SMART Play Experience in Los Angeles ran out of yellow paper bags on Saturday afternoon. Staff switched to white ones. Nobody in the line noticed. (Nobody in the line noticed in 1929 either.)
A shortage of bags is what analysts call a supply shock. It means demand has run ahead of what the system can hold. The last time I saw a pop-up run out of bags, it was a Beanie Baby stall in 1999, and we all remember the winter that followed.
The LA stop lets fans test LEGO's new SMART Play tech, bricks that react as you build with them, before the tour rolls on to Phoenix and Dallas. Forbes went inside and asked whether the experience is worth it. That is the wrong question. The right question is who sits on the other side of the trade.
The answer arrived by lunchtime. Gravel Street Capital, a small Los Angeles fund, confirmed it has taken the first short position ever recorded against Pikachu. A short is a bet that something will lose value: you borrow it, sell it, and hope to buy it back cheaper later.
The fund borrowed fourteen Pikachu figures from children waiting in line. It sold them to children further back in the same line. It has promised to return all fourteen, in Dallas, before the tour ends.
"Every hype cycle has a top, and this one has a queue you can see from the freeway," said Preston Dourley, the fund's managing partner, from a folding chair beside the exit. "We are not against joy. We are simply positioned for the moment after joy."
"A brick that lights up is a brick that can go dark."
LEGO spokesperson Marit Holm said the company does not comment on the positioning of outside funds. She asked that all borrowed Pikachus come back in their original condition. "The children are the lenders here," she said. "We would like them to understand what a margin call is before Phoenix."
The market moved anyway. By closing time a single Pikachu figure changed hands near the exit for roughly the price of two tickets. (I watched it happen. I wish I had not.) Call it what you like. I call it 2007, with wristbands.
The tour heads to Phoenix and Dallas next, and Dourley says he will be there, in the same folding chair, waiting to buy back cheap. I asked him what happens if Pikachu never falls. He looked at the line, still growing, and said the thing every bear says at the top. "It always falls. The bricks are just the last to know."
