Steve Marcus / Reuters
- Steve Cohen’s Point72 and Ken Griffin’s Citadel are investing $ 2.75 billion in Melvin Capital.
- Melvin has dropped about 30% this year as his short positions are being hammered.
- Day traders have increased the prices of GameStop, Bed Bath & Beyond and other popular shorts.
- Visit the Business Insider home page for more stories.
Two billionaire investors are launching to support a short selling hedge fund in their battle against an army of irreverent day traders.
Steve Cohen’s Point 72, Ken Griffin’s Citadel and other partners are investing $ 2.75 billion in Melvin Capital, hedge funds said on Monday. They will receive non-controlling interests in Melvin’s revenue in exchange for their money.
Melvin will welcome the cash injection, as the painful short bets left her with a 30% drop in the year to Friday, the Wall Street Journal reported.
Many retail investors, including some members of the Reddit r / wallstreetbets forum, have been targeting heavily sold stocks in recent weeks. They raised GameStop’s share price by 145% on Monday, Bed Bath & Beyond by 58%, BlackBerry by 48% and AMC by 39%.
Melvin takes more negative positions than most of his Wall Street rivals, exposing him to potentially heavy losses. It had put options – bets that the stock price would fall – at 17 US-listed companies, including GameStop and Bed Bath & Beyond in late September.
The company’s strategy has paid off in the past. Melvin has had an average return of 30% per year since its founding in 2014 and increased its assets under management to $ 12.5 billion earlier this year, The Journal said.
Gabe Plotkin, a former portfolio manager at Cohen’s SAC Capital, left to start Melvin in 2014. He featured Cohen as a first day sponsor.
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