Melvin Capital closed its short-sell position at GameStop on Tuesday afternoon after a major loss, hedge fund manager told Andrew Ross Sorkin of CNBC.
GameStop, the hedge funds ’most shorted stock, was targeted by an army of stock-members who traded forcefully against short traders in online chat rooms. At the Reddit “wallstreetbets” forum with more than 2 million subscribers, rookie investors encouraged each other to accumulate GameStop shares and OTM options, creating major short-squeeze issues in the GME stock.
Rally In GME Shares
CNBC has not been able to confirm the amount of the loss of Melvin Capital. Citadel and Point72 have invested nearly $ 3 billion in Gabe Plotkin’s hedge fund to strengthen its funding. On Wednesday’s “Squawk Box,” Sorkin said Plotkin told him that speculation about bank filing bankruptcy was false.
GameStop shares more than doubled this week alone reaching nearly $ 150 each, driving January profits to 685%. The stock was worth $ 6 four months ago.
Shares of the brick and mortar video game vendor showed up another 140% on Wednesday, pushing the company’s market cap to reach $ 21 billion.
GameStop became one of the most traded names in the US stock market on Tuesday, topping Tesla and Apple, even though they are 81 and 233 times larger in market cap terms, according to Deutsche Bank strategist Jim Reid.
Fate Of GME Short Sellers
Amid GameStop’s explosive rally, short sellers have accumulated losses of more than $5 billion year to date in the stock, including a loss of $917 million on Monday and $1.6 billion on Friday, according to data from S3 Partners.
Short seller Andrew Left of Citron Research said on Wednesday he had covered most of his short position at GameStop with a loss. Earlier he said GameStop would get back the $ 20 share “immediately” called out attacks from the “angry mob” that owns the stock.
Investor Michael Burry said in a now-deleted tweet Tuesday that trading in GameStop is “unnatural, insane, and dangerous” and there should be “legal and regulatory repercussions.” Burry shot to fame by betting against the housing bubble and was featured in Michael Lewis’ book “The Big Short.”
The Securities and Exchange Commission declined to comment.
Entry Of The Big Names
Chamath Palihapitiya of Social Capital is among those who jumped on the bandwagon, saying on Twitter on Tuesday that buying GameStop call options to bet stocks will go up. His tweet seemed to strengthen the rally in the previous session. The stock ended 92% over the day at $ 147.98.
After Tuesday’s closing bell, Elon Musk commented on the mania, linking it to the “wallstreetbets” Reddit chat room. The Tesla CEO tweeted to his 42 million followers “Gamestonk!!” The comment appeared to help send GameStop shares soaring in extended trading Tuesday.
Synopsis
Melvin Capital closed its short-sell position in GameStop on Tuesday afternoon after a major loss, a hedge fund manager told CNBC.
CNBC was unable to confirm the amount of losses the company made in the short position. Citadel and Point72 have invested nearly $ 3 billion in Melvin Capital to fund its investments.
Melvin manager Gabe Plotkin told Andrew Ross Sorkin that speculation about a bankruptcy filing is false.
