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Steve Marcus / Reuters
- Steve Cohen’s Point72 and Ken Griffin’s Citadel invest $ 2.75 billion in Melvin Capital.
- Melvin is down around 30% this year as his short positions get hammered.
- Day traders drove the stock prices of GameStop, Bed Bath & Beyond, and other popular shorts up.
- Visit the Business Insider homepage for more stories.
Two billionaire investors rush to back a short hedge fund in its battle against an army of irreverent day traders.
Steve Cohen’s Point 72, Ken Griffin’s Citadel and other partners are investing a total of $ 2.75 billion in Melvin Capital, the hedge funds said Monday. They will receive unchecked income shares in Melvin in exchange for their money.
Melvin will be happy with the cash injection as painful short bets have left him down 30% since the start of the year on Friday, the Wall Street Journal reported.
Many retail investors, including some members of the Reddit r / wallstreetbets forum, have been targeting heavily sold stocks in recent weeks. They pushed GameStop’s stock price up to 145% on Monday, Bed Bath & Beyond by 58%, BlackBerry by 48% and AMC by 39%.
Melvin is taking more negative positions than most of his Wall Street rivals, exposing him to potentially heavy losses. It held “put” – bet on a drop in the price of a share – on 17 companies listed in the United States including GameStop and Bed Bath & Beyond at the end of September.
The company’s strategy has paid off in the past. Melvin has reported an average of 30% per year since its founding in 2014 and increased its assets under management to $ 12.5 billion early this year, the Journal said.
Gabe Plotkin, a former star portfolio manager at Cohen’s SAC Capital, left Melvin in 2014. He counted Cohen as one of the backers from day one.
Read more: GOLDMAN SACHS: These 22 stocks are still not back to pre-pandemic levels – and are set to explode amid higher profits in 2021 as the economy recovers
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