Hedge fund boss defends his company’s bet against GameStop
In a House Financial Services Committee hearing, Gabriel Plotkin, founder and CEO of Melvin Capital hedge fund, defended his firm’s long-term strategy of betting that GameStop shares would fall.
Contrary to many reports, Melvin Capital was not saved amid these events. Citadel has been proactive in becoming a new investor, similar to the investments others make in our funds. It was an opportunity for Citadel to buy cheap and generate returns for its investors as our fund rose in value. Of course, Melvin got through a difficult time, but we always had access to margins and didn’t want an injection of money. And absolutely none of Melvin’s short positions are part of an effort to artificially push or manipulate the stock price. Nothing about our short position prevents a company from achieving its goals. It’s just Melvin’s view of whether it will be like that. For GameStop specifically, we had a research-based view long before recent events. In fact, we’ve kept GameStop short since Melvin was founded six years earlier because we believed and believe that its business model of selling new and used video games in physical stores is being overtaken by digital downloads over the internet. And that trend didn’t accelerate until 2020 when people started downloading video games at home due to the pandemic. As a result, the game industry had its best year ever, but GameStop suffered significant losses. In January 2021, a group on Reddit began posting posts on Melvin’s specific investments. They took information from our SEC filings and encouraged others to act in the opposite direction. Many of these posts were littered with anti-Semitic slander directed against me and others. Ordinary investors who were persuaded into a misleading frenzy to buy GameStop for $ 100, $ 200, or even $ 483 have now lost significant amounts. When that frenzy began, Melvin began to close his position at GameStop at a loss, not because our investment thesis changed, but because something unprecedented happened. We also trimmed many other Melvin positions at significant losses, both long and short positions that were the subject of similar items.
In a House Financial Services Committee hearing, Gabriel Plotkin, founder and CEO of Melvin Capital hedge fund, defended his firm’s long-term strategy of betting that GameStop shares would fall.creditCredit…Financial Services Committee
The Citadel hedge fund pumped billions of dollars into Melvin Capital after that fund’s bet against GameStop failed, resulting in huge losses. Now Citadel is taking back some of its money.
Citadel has notified Melvin of its plans to recover $ 500 million of the $ 2 billion injected in late January, according to two people who were made aware of the matter and were not empowered to speak publicly about it. Under the terms of Citadel’s investment, the money will be paid back in late September, people said as the third quarter draws to a close.
Citadel’s plan was first published in the Wall Street Journal.
The cash injection came in late January when Melvin struggled with a major turnaround on his GameStop short bet. GameStop’s shares have stagnated in recent years as it struggled to transform itself from a brick and mortar video game retailer to a more modern e-commerce company. But the company’s stock skyrocketed in January after naming new directors of Chewy.com, which sells pet products, and rising into the stock as small investors, spurred on by the WallStreetBets forum on Reddit.
Melvin suffered heavy losses as it struggled to cover the cost of its false trade. Some of his other short positions, including his bet against cinema company AMC Entertainment, also hurt him.
Chicago-based Citadel and Point72 Asset Management – a Stamford, Connecticut-based fund that once worked for Melvin’s founder, Gabriel Plotkin – raised $ 2.75 billion in cash on Jan. 25. The injections helped stabilize Melvin, which has had double-digit percentage returns since Feb. 1, according to one of the people who was briefed on its performance.
Melvin is still down 41 percent through July this year, according to a New York Times-audited investor letter because of its heavy losses in January.
As part of its investment, Citadel receives a portion of Melvin’s earnings in addition to the income it receives on its money, the two people said. Citadel also received the right to withdraw at least some of its cash as early as the third quarter of this year, these individuals added – a right it is now exercising. (Hedge fund investors usually need to keep their capital invested for an extended period of time.) Citadel, which has $ 38 billion in assets, the company’s returns.
Mr. Plotkin declined to comment. Kenneth C. Griffin, the founder of Citadel, did not respond to requests for comment.
“I got the same deal as Ken,” said Steven Cohen, CEO of Point72, “and no plans to redeem it.”
Continue readingCredit…Gabriela Bhaskar / The New York Times
New York is lagging behind the rest of the country in its economic recovery, with an unemployment rate of 10.5 percent, almost twice the national average. Instead of experiencing the stronger recovery that it had anticipated, the city is now facing new challenges.
Total employment remains more than half a million below pre-pandemic levels, with the leisure, hospitality and other commercial sectors continuing to decline sharply.
Many companies have given up plans to bring their employees back to the office shortly. Boston Properties, which owns nearly 12 million square feet in the New York area, said about 40 percent of prepandemic residents had returned to their buildings earlier this summer based on lobby badges. In August this value had dropped to around 30 percent.
It is less clear whether some suburban workers will ever return to the city and their sometimes arduous commissions. Greenberg Traurig, a global law firm, has scaled back its planned Manhattan presence and is now planning to open two new offices on Long Island, where many of its lawyers and investor clients have moved during the pandemic.
New York attracts more international tourists than any other American city. However, visitors from Europe are still banned. Domestic travelers have returned to New York in increasing numbers, but they don’t stay as long or spend as much as overseas tourists.
There are signs of hope. But even as the city sponsored an official Homecoming Week, trade shows and other major event cancellations have increased. READ THE ARTICLE →
Credit…Google; COVID alert NY
With some people returning to the office or classroom after the pandemic has been interrupted for more than 18 months, maintaining social distance remains an issue, especially with the highly contagious Delta variant spreading nationwide. JD Biersdorfer, tech tip columnist for the New York Times, has a few simple suggestions for using your smartphone to stay current and safe when you return to the office or school.
Stay informed: Regular reviews of school, community, and state websites can keep you updated on mask requirements, vaccination requirements, quarantines, and other Covid-related news.
Carry your card: Certain institutions, venues, and employers now require vaccinations, and many New York companies require proof and will enforce it next month. Your paper vaccination card is used as proof, but you can keep it safe at home and digitize it.
Change your commute route: Commuting is more of a challenge for people who use local transport. Over the past year, both Apple and Google added coronavirus-related business information to their map apps.
Refueling: If a drive-through window is not an option for remotely picking up your breakfast or lunch, there are other ways to minimize your exposure, such as walking around the corner.
Take away video: With the mobile version of your company’s favorite video conferencing app, you can leave a conference room and hold a meeting anywhere, even without your computer.