Melvin Capital Management, one of the hedge funds hiding on social media message boards for its short-selling bets that GameStop stock would fall, lost 53 percent on its portfolio in January, a person familiar with the matter said.
One of the main reasons was the massive losses the company suffered when small investors bid for GameStop’s stock. The Wall Street Journal first reported the amount of Melvin Capital’s loss.
Founded by Gabe Plotkin, a protégé of hedge fund billionaire and New York Mets owner Steven A. Cohen, Melvin Capital had $ 8 billion in assets under management at the end of January. That amount included $ 2.75 billion that Mr. Cohen’s fund, Point72, and Citadel, another hedge fund, put into Melvin Capital, as well as fresh capital from new investors, the person said.
Hedge fund returns at Citadel fell 3 percent this month, about a third of which was driven by a $ 2 billion investment it made in Melvin about a week ago, according to two people who were aware of Citadel’s results.
Melvin Capital left his position in GameStop after having to raise additional funds, Mr. Plotkin to CNBC last week. The company was a protagonist in the market drama sparked by a group of day traders who gave up a handful of shares Wall Street had given up – forcing losses for large hedge funds.
The traders seem to be mostly retail investors targeting a handful of stocks such as GameStop and AMC Entertainment. But they have emerged as a new risk factor for large companies that had bet against those companies with so-called short sales. While the financial damage on Wall Street seems limited to a number of companies so far, the volatility shocked the broader market. The S&P 500 fell 1.9 percent on Friday, ending its worst week in three months.