Melvin Capital closed its short position in GameStop on Tuesday afternoon after taking a big loss, fund manager Gabe Plotkin told CNN’s Andrew Ross Sorkin.
The retailer of brick-and-mortar video games, the most hated stock of hedge funds, was targeted by an army of retail investors who acted against short sellers in online chat rooms. In the Reddit forum, “wallstreetbets” with more than two million subscribers, new investors encouraged each other to stack up to GameStop’s stock and buy options, which created a big short print on the name.
CNBC could not confirm the amount of losses the firm had taken on the short position. Citadel and Point72 have raised nearly $ 3 billion in Melvin Capital to increase the fund’s finances. Plotkin told Sorkin that the speculation that the firm would file for bankruptcy was false.
GameStop shares alone more than doubled this week to nearly $ 150 apiece, raising January profits to 685%. The stock was only worth $ 6 four months ago.
GameStop shares gained about 60% in pre-trading on Wednesday, after rising more than 100% earlier in the session.
Amid GameStop’s explosive rally, short sellers to date have accumulated losses of more than $ 5 billion in the stock, including a loss of $ 917 million on Monday and $ 1.6 billion on Friday, according to data from S3 Partners.
Short seller Andrew Left of Citron Research said on Wednesday that he had covered the majority of his short position in GameStop with a loss. He said earlier that GameStop would “quickly” fall back to $ 20 per share and called for attacks from the “angry mob” that owns the stock.
Investor Michael Burry said in a tweet on Tuesday that trading in GameStop is “unnatural, insane and dangerous” and that there should be “legal and regulatory consequences”. Burry gained notoriety by betting against the housing bubble and can be seen in Michael Lewis’ book “The Big Short”.
The U.S. Securities and Exchange Commission declined to comment.
Social Capital’s Chamath Palihapitiya jumped into the controversial name and said in a Tuesday tweet that he had bought GameStop call options to bet that the share would be higher. His tweet seems to have intensified the protest in the previous session. The stock ended the day 92% higher at $ 147.98.
Elon Musk commented on the mania on Twitter after the clock on Tuesday and linked to the “wallstreetbets” Reddit chat room. The Tesla CEO tweeted to his 42 million followers ‘Gamestonk !!’ The comment seems to be helping to boost GameStop shares during extended trading.