R/WallStreetBets fallout
A client of Melvin Capital says that, after the uproar surrounding short-selling GameStop stocks, the company has “massively de-risked” its investment portfolio.
Before retail investors from Reddit caused the company to lose billions on its GameStop short positions, Melvin Capital began 2021 with $12.5 billion in cash.
The hedge fund had a little more than $8 billion in assets at the end of January, according to a Wall Street Journal article, which included a $2.75 billion investment earlier this month from 2 other prominent asset management companies. According to individuals associated with the business, this reflects a 53 percent decline.
In the paper, a client believes that, after the controversy involving short selling of GameStop stocks, Melvin has “massively de-risked” its investment portfolio. Melvin has restructured its portfolio to enhance its capacity to quickly exit shares, people familiar with the hedge fund said. The hedge fund, as well as Citron Capital, another company participating in the shorts, officially closed their positions last week with GameStop.
After Robinhood, a site with financial ties to Melvin, and other investment instruments limited trading for GameStop stock in the midst of a price spike, several of the major players involved in the GameStop short squeeze are facing uproar online. Allegations of market manipulation were triggered by retail investors apparently being cut off from financial instruments given to major hedge funds.
“On Friday, the U.S. Securities and Exchange Commission reported that it would “closely review actions taken by controlled agencies,” reportedly in conjunction with the situation involving Citadel, Melvin, Robinhood, and probably the r/WallStreetBets subreddit retail investors. In addition, in Illinois and New York, Robinhood is facing two class-action lawsuits in federal courts.
When markets closed on Friday, the price of GameStop stock was $325, having risen 67 percent in the previous 24 hours & what the future holds for GME is anyone's guess.
