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Melvin Capital closed its short position on GameStop on Tuesday afternoon after suffering a huge loss, fund manager Gabe Plotkin told CNBC’s Andrew Ross Sorkin.
The physical video game retailer, the most hated hedge fund security, has been targeted by an army of retail investors who have rallied against short sellers in online chat rooms. In the Reddit “wallstreetbets” forum with more than two million subscribers, first-time investors encouraged themselves to cram into GameStop’s capital and buy options, creating massive short presses in the name.
CNBC could not confirm the amount of losses incurred by the company on the short position. Citadel and Point72 have injected nearly $ 3 billion into Melvin Capital to consolidate the fund’s finances. Plotkin told Sorkin that the speculation that the company would file for bankruptcy is false.
GameStop shares more than doubled this week alone to nearly $ 150 each, taking its January gains to 685%. The stock was only worth $ 6 four months ago.
GameStop shares gained around 60% in pre-market trading on Wednesday, after jumping more than 100% earlier in the session.
Amid GameStop’s explosive rally, short sellers have racked up more than $ 5 billion year-to-date losses in the stock, including a loss of $ 917 million on Monday and a loss of $ 1.6 billion on Monday. dollars Friday, according to data from S3 Partners.
Citron Research short seller Andrew Left said Wednesday he hedged the majority of his short position on GameStop at a loss. He previously said GameStop would drop back to $ 20 a share “quickly” and called the attacks by the “angry mob” who own the stock.
Investor Michael Burry said in a now deleted tweet Tuesday that trading on GameStop is “unnatural, senseless and dangerous” and that there should be “legal and regulatory repercussions.” Burry rose to fame by betting against the real estate bubble and was featured in Michael Lewis’ book “The Big Short”.
The US Securities and Exchange Commission declined to comment.
Social Capital’s Chamath Palihapitiya jumped into the controversial name, claiming in a tweet on Tuesday that he had bought GameStop call options on a bet that the stock will rise. His tweet seemed to intensify the rally in the previous session. The stock ended the day up 92% to $ 147.98.
Elon Musk after the bell on Tuesday commented on the mania on Twitter and linked to the Reddit “wallstreetbets” chat room. The CEO of Tesla tweeted to his 42 million subscribers “Gamestonk !!” The comment appeared to help send GameStop’s shares soar into extended trading on Tuesday.
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