Melvin Capital closed short on GameStop on Tuesday afternoon after a huge loss, fund manager Gabe Plotkin told CNBC’s Andrew Ross Sorkin.
The distributor of brick and mortar video games, the worst stock of hedge funds, has been targeted by an army of retail investors who have faced short sellers in online chat rooms. In the Reddit forum “wallstreetbets” with more than two million subscribers, novice investors encouraged each other to join the GameStop action and appeal options, creating massive short cuts in the name.
CNBC could not confirm the amount of losses that the company took on the short position. Citadel and Point72 have infused nearly $ 3 billion into Melvin Capital to support the fund’s finances. Plotkin told Sorkin that speculation that the company was going bankrupt was false.
GameStop shares have more than doubled this week, reaching nearly $ 150 a piece, bringing its January earnings to 685%. The action was worth only $ 6 four months ago.
GameStop shares gained about 60% in premarket trading on Wednesday, after appearing more than 100% earlier in the session.
Amid the explosive GameStop rally, missing sellers have so far amassed $ 5 billion in stock, including a loss of $ 917 million on Monday and $ 1.6 billion on Friday, according to S3 Partners.
Short seller Andrew Left of Citron Research said on Wednesday that it had covered most of its short position in GameStop with losses. He previously said that GameStop would return to $ 20 per share “quickly” and called for attacks from the “angry mob” that owns the shares.
Investor Michael Burry said in a now-deleted tweet on Tuesday that trading in GameStop is “unnatural, crazy and dangerous” and that there should be “legal and regulatory repercussions”. Burry rose to fame by appearing against the housing bubble and was featured in Michael Lewis’ book “The Big Short.”
The US Securities and Exchange Commission declined to comment.
Chamath Palihapitiya of Social Capital jumped on the controversial name, saying in a tweet on Tuesday that he bought GameStop call options, betting that the stock will increase. His tweet seemed to intensify the rally from the previous session. The stock ended the day 92% higher at $ 147.98.
Elon Musk, after the bell, commented on the mania on Twitter on Tuesday and linked to the Reddit chat room “wallstreetbets”. Tesla CEO sent “Gamestonk !!” to his 42 million followers on Twitter The comment came in to help send rising GameStop shares to extended trading on Tuesday.