Melvin, GameStop’s big short seller, bet that the company’s stock would fall. But on January 11, GameStop announced new board members who could help it with digital sales. This sparked a fury on Reddit, namely the subreddit WallStreetBets, which catapulted GameStop’s shares to more than 1,600%.
Hedge funds like Melvin with huge short positions on GameStop and other stocks targeted by WallStreetBets were burned. The Reddit group specifically targeted stocks that were short sold. At one point, GameStop had more open interest than shares in the market.
The Wall Street Journal first reported Melvin’s losses.
Melvin Capital was founded by Gabe Plotkin and started the year with about $ 12.5 billion in assets. It ended the month with more than $ 8 billion, after receiving commitments from current investors for more capital in the last days of the month, the source said.
Last week, Citadel, a hedge fund owned by billionaire Ken Griffin, provided the company with a ransom of more than $ 2 billion.
“The liquidity of the fund’s portfolio is strong,” said the source. “The use of leverage is at its lowest level since Melvin Capital started in 2014.”
Melvin found himself at the center of the GameStop saga after Robinhood suspended trading in shares and several others on Thursday. The move was followed by a violent attack by individual investors, such as those at Reddit, who felt that Robinhood was giving in to pressure from Wall Street and requests from hedge fund managers.
The frustration of Robinhood users was soon followed by collective action against the stock trading app for its decision to restrict stock trading like GameStop.