Melvin, a major short seller of GameStop, bets that the company’s shares would fall. But on January 11, GameStop announces new board members that can help with digital sales. This sparked outrage on Reddit, namely the subreddit WallStreetBets, which dropped GameStop’s share by more than 1,600%.
Hedge funds like Melvin with big short positions in GameStop and other stocks targeted by WallStreetBets have burned out. The Reddit group specifically targeted stocks that were heavily shorted. At one point, GameStop had more interest than stocks in the market.
The Wall Street Journal first reported Melvin’s losses.
Melvin Capital was founded by Gabe Plotkin and started the year with about $ 12.5 billion in assets. It ended the month with more than $ 8 billion after meeting current investors’ commitments for more capital in the last days of the month.
Last week, Citadel, a hedge fund owned by billionaire Ken Griffin, provided the firm with a lifeline of more than $ 2 billion.
“The fund’s portfolio liquidity is strong,” the source said. “Leverage financing has been at its lowest level since Melvin Capital’s inception in 2014.”
Melvin finds himself at the heart of the GameStop saga after Robinhood on Thursday suspended trading in the stock and several others. The move was followed by an onslaught of setbacks from individual investors, such as those from Reddit, who believe Robinhood is putting pressure under pressure from Wall Street and the requests of hedge fund managers.
The frustration of Robinhood users was soon followed by a lawsuit against the stock trading app over the decision to restrict trading in stocks like GameStop.