US hedge fund Melvin Capital Management lost 53% of its investment in January amid a record rally in GameStop and other stocks the fund was betting against, The Wall Street Journal reported Sunday.
The salvation of the video game company has had a negative impact on Melvin Capital, founded by star manager Gabe Plotkin and which started the year with around 12,500 million dollars (10,298.66 million euros) and now has more than 8,000 million dollars (6,591.14 million euros), after an emergency injection of 2,750 million by Citadel and Point72 last week.
That operation expands the non-voting stake in Melvin, but has also caused losses to Citadel and Point72, the fund owned by Steven Cohen, owner of the New York Mets baseball team.
According to the sources, Melvin has exited the riskiest short positions after millions of small investors coordinated on social networks such as Reddit, YouTube or Discord pushed up stocks that were being short betted by large funds, which they expected devaluations before the expiration of their contracts.
One of the largest hedge funds on Wall Street
Melvin had established himself in recent years as one of Wall Street’s top hedge funds, but with a short position in GameStop. The Wall Street Journal points out that the losses extended beyond GameStop with falls coming from its entire portfolio during a period of market turmoil in January.
GameStop shares finished last week with a 400% gain, bringing its total return this year to 1,625%. The stock closed Friday’s session at $325. In October, it was trading below $10.
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