Hedge fund giants Steve Cohen and Ken Griffin are joining forces to rescue a fellow trader whose positions in decadent stocks, like GameStop, are being hammered.
Griffin’s Citadel and Cohen’s Point72 Asset Management are investing $ 2.75 billion in Melvin Capital Management, which has seen its recent bets on stock declines thwarted by a small army of investors with dreams of getting rich quick.
The fund, managed by Cohen’s former lieutenant Gabe Plotkin, fell 30%, the Wall Street Journal reported.
The bailout comes as retail investors flock to online forums like the Reddit board “wallstreetbets” to push each other to invest in cheap stocks with short positions against them using free trading sites like Robinhood.
GameStop, against which Plotkin has been betting, had a 102 per cent stake in its outstanding shares on Friday, making it a prime target for sending higher shares through what is known as short squeeze.
GameStop’s shares rose about 178 percent between the close of Thursday and the start of Monday’s trading session as investors sought to squeeze short sellers like Plotkin and Andrew Left, who complained last week of threatened by their predictions that stocks would fall.
“He was sold in a market that no longer allows people to be sold,” complained a hedgie. “Today, you take a stand after doing the work, so some guys on Reddit use their phones to buy low-cost stocks and you end up with your face ripped off. It’s crazy. “
“I have known Gabe Plotkin since 2006 and he is an exceptional investor and leader,” said Cohen, who will add $ 750 million to his existing investment in the fund. “We are pleased to have the opportunity to invest additional capital and obtain a non-controlling interest in Melvin Capital’s revenue.”
Melvin Capital saw a 47 percent gain in 2019 after losing money in 2018. About a third of Point72’s performance in 2019 comes from its $ 1 billion stake in Melvin.
Griffin and Cohen competed openly to negotiate talent in the past, with Griffin once even hiring – and then firing – Cohen’s brother-in-law at Citadel.
But Plotkin – and hopes to recover from the chaos – seems to have brought the two men together.
“Gabe Plotkin and the team have delivered exceptional results throughout Melvin’s history,” Griffin said in a statement to The Post after confirming that Citadel and his partners will inject $ 2 billion into Melvin’s books. “We have great confidence in Gabe and his team.”
“If Ken Griffin is giving Gabe Plotkin $ 2 billion, he is not doing it to be a nice guy,” said another hedge fund manager. “He clearly thinks Plotkin is going to recover.”