Melvin, a major GameStop short seller, has bet that the company’s shares will fall. But on January 11, GameStop announced new board members who could help him with digital sales. This sparked a rage on Reddit, namely the subredditing of WallStreetBets, which catapulted the GameStop stock by more than 1,600%.
Hedge funds such as Melvin with huge short positions in GameStop and other WallStreetBets stocks were burned. The Reddit Group specifically targeted actions that were very short-circuited. At one point, GameStop had a shorter interest than market shares.
The Wall Street Journal first reported Melvin’s losses.
Melvin Capital was founded by Gabe Plotkin and started the year with assets of about $ 12.5 billion. The month ended 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, offered the company more than $ 2 billion in aid.
“The fund’s portfolio liquidity is strong,” the source said. “The use of leverage is at its lowest level since Melvin Capital was established in 2014.”
Melvin found himself at the center of the GameStop saga after Robinhood suspended trading the action and a few others on Thursday. The move was followed by a backlash from individual investors, such as Reddit, who saw Robinhood succumb to pressure from Wall Street and demands from hedge fund managers.
Frustration from Robinhood users was soon followed by a class action lawsuit against the stock trading app for its decision to restrict stock trading such as GameStop.