Melvin Capital, Squeezed by Its Bets Towards GameStop, Misplaced 53 P.c in January


Melvin Capital Management, one of the hedge funds denounced on social media message boards for its short selling bets that GameStop stock would fall, lost 53 percent of its portfolio in January, said a person familiar with the matter.

A primary reason was the huge losses the company suffered when small investors raised GameStop’s stock. The Wall Street Journal first reported the size of Melvin Capital’s loss.

Melvin Capital was founded by Gabe Plotkin, a protégé of hedge fund billionaire and New York Mets owner Steven A. Cohen, and had $ 8 billion under management at the end of January. That amount included $ 2.75 billion that Mr. Cohen’s Point72 fund and Citadel, another hedge fund, had invested in Melvin Capital, as well as fresh capital from new investors, the person said.

Citadel hedge fund returns fell 3 percent for the month. About a third of that was caused by a $ 2 billion investment in Melvin about a week ago, two people reported on Citadel’s findings.

Melvin Capital left his position at GameStop after raising additional funds, Plotkin confirmed to CNBC last week. The company was a major player in the market drama sparked by a group of day traders who bid a handful of stocks that Wall Street had abandoned – resulting in losses to large hedge funds.

The traders appear to be mostly retail investors who focus on a handful of stocks like GameStop and AMC Entertainment. However, they have emerged as a new risk factor for large companies that have wagered against these companies with so-called short sales. While the financial damage on Wall Street seems to have been confined to a number of companies so far, the volatility has rocked the broader market. The S&P 500 fell 1.9 percent on Friday, ending its worst week in three months.