The hedge fund giants Steve Cohen and Ken Griffin are joining forces to rescue a fellow trader whose positions in runaway stocks such as GameStop have been hammered.
Griffin’s Citadel and Cohen’s Point72 Asset Management are investing a total of $ 2.75 billion in Melvin Capital Management, which has hampered the recent commitment to stock declines by a small army of investors with fast-rich dreams.
The fund, led by former Cohen lieutenant Gabe Plotkin, fell 30 percent, the Wall Street Journal reported.
The salvation comes when retail investors push online forums like ‘wallstreetbets’ from Reddit to push each other to invest in cheap stocks, with short positions against them, without using trading sites like Robinhood.
GameStop, against which Plotkin bet, had a short stake of 102 percent of its outstanding shares on Friday, making it the biggest goal to send a stock higher through a short push.
Shares in GameStop rose 178 percent between Thursday’s close and early trading, as investors wanted to push short sellers such as Plotkin and Andrew Left, who complained last week that they were being threatened over its predictions that the stock would fall.
“He was short in a market that no longer allows people to stay short,” complains one hedgie. ‘Today you take a position after you’ve done the job, and then some guys on Reddit use their phones to buy penny stocks, and you end up sitting with your face down. It’s nut. ”
“I have known Gabe Plotkin since 2006 and he is an extraordinary investor and leader,” said Cohen, who will add $ 750 million to his current investment in the fund. “We are delighted to have the opportunity to invest additional capital and take a non-controlling interest in Melvin Capital.”
Melvin Capital made a profit of 47 percent in 2019 after losing money in 2018. About one-third of Point72’s performance in 2019 comes from its $ 1 billion stake in Melvin.
Griffin and Cohen have openly competed for talent trading in the past, and Griffin once hired Cohen’s brother-in-law – and then fired – at Citadel.
But Plotkin – hoping to recover from the chaos – appears to be uniting the two men.
“Gabe Plotkin and his team have delivered exceptional results on Melvin’s history,” Griffin told The Post in a statement after confirming that Citadel and its partners would pump $ 2 billion into Melvin’s books. “We have great confidence in Gabe and his team.”
“If Ken Griffin gives $ 2 billion to Gabe Plotkin, he’s not doing it to be a good man,” said another hedge fund manager. “He clearly thinks Plotkin is going to bounce back.”