A person familiar with the matter, Melvin Capital Management, one of the hedge funds on social media message boards, said because of the short-selling commitment that GameStop shares would fall.
The main reason for this was the huge losses that the company suffered when small investors offered the stock of GameStop. The Wall Street Journal first reported the amount of the loss of Melvin Capital.
Melvin Capital, founded by Gabe Plotkin, a hedge fund billionaire protégé and New York Mets owner Steven A. Cohen, had $ 8 billion in assets under management at the end of January. The amount included $ 2.75 billion that Cohen’s fund, Point72, and Citadel, another hedge fund, poured into Melvin Capital, as well as new capital from new investors.
Revenue from hedge funds at Citadel fell 3 percent for the month, about a third of which was due to a $ 2 billion investment it made in Melvin about a week ago, according to two people who informed Citadel’s results .
Melvin Capital has left its position in GameStop after having to raise additional funds, Mr. Plotkin confirmed to CNBC last week. The firm was a major player in the market drama started by a group of day traders, offering a handful of shares that Wall Street gave up – forcing losses on large hedge funds.
The traders appear to be mostly small investors focusing on a handful of stocks such as GameStop and AMC Entertainment. But it has become a new risk factor for large companies that have been known against the companies with the short sales. While the financial damage on Wall Street has so far been limited to a number of businesses, volatility has rocked the broader market. The S&P 500 fell 1.9 percent on Friday, ending the worst week in three months.