Steve Marcus / Reuters
- Steve Cohen’s Point72 and Ken Griffin’s Citadel invest $ 2.75 billion in Melvin Capital.
- Melvin is down about 30% this year because of his short positions.
- Day traders offered the stock prices of GameStop, Bed Bath & Beyond and other popular shorts.
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A few billionaires are investing to support a short-selling hedge fund in the fight against an army of respectable day traders.
Steve Cohen’s Point 72, Ken Griffin’s Citadel and other partners are plowing a total of $ 2.75 billion into Melvin Capital, hedge funds said Monday. They will receive non-controlling income shares in Melvin in exchange for their money.
Melvin will welcome the cash injection because painful short bets dropped it by 30% until Friday, reports The Wall Street Journal.
Numerous retail investors, including members of Reddit forum r / wallstreetbets, have fallen heavily on equities in recent weeks. They increased GameStop’s share price by 145% on Monday, Bed Bath & Beyond by 58%, BlackBerry by 48% and AMC by 39%.
Melvin takes more negative positions than most of its competitors on Wall Street and exposes them to potentially huge losses. The company owned ‘laws’ (laws that would lower a share price) on 17 U.S. listed companies, including GameStop and Bed Bath & Beyond, at the end of September.
The company’s strategy has borne fruit in the past. Melvin has averaged 30% annually since its inception in 2014 and its assets grew to $ 12.5 billion at the beginning of this year, The Journal said.
Gabe Plotkin, a former portfolio manager at Cohen’s SAC Capital, stopped starting Melvin in 2014. He considered Cohen a daydreamer.
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