By Svea Herbst-Bayliss
BOSTON (Reuters) – Melvin Capital, the hedge fund at the center of the GameStop drama, lost 53% in January, but received fresh money pledges from investors in the last days of the month, a source familiar with the fund said on Sunday.
Melvin ended January with more than $ 8 billion in assets, after starting the year with about $ 12.5 billion in assets, the source said.
Founded in 2014 by Gabe Plotkin, the company had bet that the stock of the ailing video game store GameStop, which traded for less than $ 5 five months ago, would fall. But a wave of retail investors, who compared notes on the social media platform Reddit and used the online trading app Robinhood, took the other side of Plotkin’s trading to send the stock up 1.625% this month and close at $ 325 on Friday.
The Wall Street Journal was the first to report the loss.
Hedge funds Point72 Asset Management and Citadel gave a $ 2.75 billion capital injection to Melvin Capital earlier this week, enabling it to close that position at a big loss.
“The liquidity of the fund’s portfolio is strong. Leverage utilization is at its lowest level since Melvin Capital was founded in 2014,” the source said.
Citadel lost less than 1% on its Melvin position in its flagship fund in January, a person familiar with the matter said on Sunday.
As news of losses at many hedge funds spread in recent days, speculation has intensified as to which companies might be forced to close their doors. Several investors and fund managers said that clients have been more patient with certain companies with a long and strong track record, likely to survive this month’s deep losses.
(Report by Svea Herbst-Bayliss; edited by Daniel Wallis)