By Svea Herbst-Bayliss
BOSTON (Reuters) – Melvin Capital, the hedge fund in the midst of the GameStop drama, lost 53% in January but received fresh cash commitments from investors in recent days, a source familiar with the fund said. Sunday said.
Melvin ended January with more than $ 8 billion in assets after starting the year with about $ 12.5 billion in assets, the source said.
The company, which was founded by Gabe Plotkin in 2014, bet that the share of video game retailer GameStop, which traded at less than $ 5 five months ago, would fall. But a spate of retail investors, comparing notes on social media platform Reddit and using the online trading app Robinhood, took the other side of Plotkin’s trading to push the stock up 1,625% this month to Friday on $ 325.
The Wall Street Journal first reported the loss.
Hedge funds Point72 Asset Management and Citadel gave a $ 2.75 billion capital inflow to Melvin Capital earlier this week, making it possible to close the position with a large loss.
“The fund’s portfolio liquidity is strong. The use of leveraged financing is at its lowest level since Melvin Capital’s inception in 2014,” the source said.
A celebrity said on Sunday that Citadel lost less than 1% in January on Melvin’s position in its flagship fund.
As news of losses has spread to many hedge funds in recent days, there have been speculations about which businesses could close their doors. Several investors and fund managers said clients were more patient with certain businesses having a long and strong track record, which they are likely to be able to survive the biggest losses of this month.
(Reporting by Svea Herbst-Bayliss; Editing by Daniel Wallis)