Sources told Charlie Gasparino of FOX Business that Steve Cohen’s hedge fund Point72 reopens to new investors after losses linked to Melvin Capital and GME short.
The recent GameStop trading frenzy has spurred legendary trader Steve Cohen to open his hedge fund, Point 72 Asset Management, once again to new investors, FOX Business discovered.
The reason? Well, it depends on who you ask.
In recent weeks, Cohen’s hedge fund has had a significant impact with the GameStop imbroglio, dropping up to 15% in January based on a Point 72 investment in Melvin Capital.
| Ticker | Safety | Last | change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 225.00 | -100.00 | -30.77% |
The shares fell another 31% on Monday.
Melvin, led by Cohen’s protégé, Gabe Plotkin, was the target of a “bear raid” that focused on heavily sold stocks that were snapped up by legions of day traders using his trading app Robinhood. Melvin was sold on GameStop shares, betting that they would fall, but instead rose 1.700% in just a few weeks, before falling low in the past few days.
But the damage to many shorts, including Melvin – and by extension Point 72 – was done. The losses of more than 50% to Melvin required a $ 750 million Cohen cash injection for the fund to survive. Billionaire Ken Griffin’s Citadel raised another $ 2.75 billion.
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The investments were announced last Monday and then quietly on Tuesday, Point 72 started approaching Morgan Stanley brokers saying it reopened the fund for new investors, and they could offer it to their clients, FOX confirmed. Business.
It is not clear what other brokers can now sell Ponto 72; Morgan Stanley is considered to be the largest broker on Wall Street, with around 16,000 financial advisers serving small investor clients.
After raising $ 10 billion at the beginning of the year, Point 72 stopped winning new customers because it needed to digest the new cash inflow.
The turnaround of Point 72 took Wall Street executives by surprise, as it was not well wired. Cohen became a frequent Twitter user after his New York Mets purchase over the summer, only to close his account after news about Melvin and his inopportune short sale of GameStop and a social media rivalry with Barstool Sports founder Dave Portnoy.
Wall Street executives say Cohen may be looking to replace his lost capital with new money due to the heavy losses he suffered from investing in Melvin. A person close to Point 72 told FOX Business that the fund is not facing a crisis of any kind and Cohen believes that now is an opportune time to raise new money amid market turmoil because of GameStop problems.
A spokesman for Ponto 72 declined to comment. A Morgan Stanley spokesman did not immediately comment.
The frenzy over GameStop and a handful of heavily sold shares underscores the changing dynamics of the stock market. Armed with commission-free trading apps like Robinhood and the ability to take small, heavy loans for the first time, retail investors are exercising their muscles in the markets like never before.
They regularly share stock information on message boards and then direct investments in unison, raising stocks to magnitudes never seen before and, at least for now, causing massive losses even to sophisticated investors on the other side of their operations. .
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The frenzy they caused in the markets has sparked bipartisan calls for stricter regulations. The concern is that these investors are inexperienced and are bidding for shares far beyond where they should trade, given the timid business prospects of the target companies. When the frenzy passes, stocks will trade sharply, leading to massive losses among many small investors who have speculated in a market that they do not fully understand.
| Ticker | Safety | Last | change | Change % |
|---|---|---|---|---|
| AMC | AMC ENTERTAINMENT HOLDINGS INC | 13.30 | +0.04 | + 0.30% |
| BB | BLACKBERRY LIMITED | 14.63 | +0.53 | + 3.76% |
| BBBY | BED BATH & BEYOND INC. | 30.26 | -5.07 | -14.35% |
Many of these newbies say they are just turning the tables on some of Wall Street’s top traders. Recently, these investors began to focus not only on GameStop, but on others, including AMC, Blackberry and Bed Bath & Beyond – formerly penny stocks – that were being sold by hedge funds.
In December, they launched a bear raid on stocks, snapping up stocks and taking them to astronomical levels. The funds in which we are sold, shares like Melvin and, to a lesser extent, Point 72 – have suffered severe losses.
In a short sale, a trader borrows a stock, sells it and hopes to profit by buying it back at a lower price to pay the debtor. But when stocks soar, as GameStop and others did, the hedge fund loses money; in the case of Melvin, he lost so much money that he needed a rescue of Point 72 and the Citadel.
Robinhood needed a kind of rescue as well. Last week, the app was forced to block negotiations on GameStop and other stocks because it did not have enough capital to settle the trades. On Friday of last week, it raised $ 1 billion to meet its settlement capital needs and, on Monday, another $ 2.4 billion.
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As FOX Business was the first to report, people with direct knowledge of the matter say that Robinhood has indefinitely suspended plans to go public through an initial public offering that he was planning sometime this year.
Robinhood has about 13 million users now, up from 500,000 in just six years. Its biggest growth occurred more recently, especially during the COVID-19 blockades, when people – mostly inexperienced investors – used the app as a form of entertainment. The stock market rebound from the March pandemic lows also brought in new users.
But with growth came the pains of growth; people close to the company admit that Robinhood may possibly need to further expand its balance sheet and protect compliance systems before going public and facing even more regulatory scrutiny.
A spokeswoman for Robinhood did not respond to an email for comment.