Melvin Capital lost 53% in January on bad trades like GameStop - WSJ

Jan. 31, 2021 11:05 AM ETGameStop Corp. (GME), BBBY, GOTUGME, BBBY, GOTU, FIZZ, BKNG, EXPDBy: Kim Khan, SA News Editor291 Comments
  • Melvin Capital Management, the hedge fund that became the face of short positions on GameStop (NYSE:GME) and required a $2.75B cash infusion, lost 53% this month, The Wall Street Journal reports.
  • The losses came not just from the GME short, but from puts on rallying stocks like Bed Bath & Beyond (NASDAQ:BBBY), GSX Techedu (NYSE:GSX) and National Beverage (NASDAQ:FIZZ) and longs that struggled like Booking Holdings (NASDAQ:BKNG) and Expedia (NASDAQ:EXPD).
  • The fund is running $8B, including the $2.75B, down from $12.5B at the start of the year.
  • Leverage is at the lowest it's been since the fund started in 2014 and new and existing clients have signed up to invest money into Melvin tomorrow.
  • In a separate article, the Journal highlighted how much market-making business Citadel, which was part of the $2.75B infusion, handled this past week.
  • Citadel Securities, which the company says is separately managed from the hedge fund, handled 29% of the GameStop trading volume from Monday to Thursday, the paper says.
  • Overall, it handles 41% of U.S. retail stock-trading volume.
  • The idea for a GameStop short squeeze was discussed on Reddit as early as four months ago, with a post laying out a play-by-play for how the gamma squeeze could happen.

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