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Here's How Much Money Some Reddit Trolls Cost the Hedge Funds, and It's Going to Get Worse
Red State ^ | 01/31/2021 | Bonchie

Posted on 01/31/2021 5:10:52 PM PST by SeekAndFind

The story of some Reddit investors on a board called Wall Street Bets crushing a hedge fund has tapered off as the weekend has carried on, though they are promising to resume their mission when trading opens on Monday. RedState has covered the story extensively, including how they targeted GameStop (among other stocks) after Wall Street got way out over their skis shorting the stock in hopes of profiting off its demise (see Reddit Trolls Beat the Stock Market, and the Elites Are Really, Really Mad).

Whatever your moral opinions on short sellers and hedge funds may be, watching a bunch of internet trolls turn the system on its head was legitimately funny. It was also somewhat cathartic to see elites that have rigged the system in their favor have it used against them. Things got so bad that trading apps moved to shut down trading on the targeted stocks in order to manipulate the markets and protect the positions of the hedge funds.

Now, we are starting to learn just how successful the retail investors on Reddit were, with the standard of success here being how much it hurts the hedge funds, not all the retail investors ultimately making money.

WOW

Melvin Capital Lost 53% in January, Hurt by GameStop, Other Bets https://t.co/Wk1PCpqaG2

— Comfortably Smug (@ComfortablySmug) January 31, 2021

Melvin Capital Management, the hedge fund that has borne the brunt of losses from the soaring stock prices of heavily shorted stocks recently, lost 53% in January, according to people familiar with the firm.

Melvin was founded by Gabe Plotkin, a former star portfolio manager for hedge-fund titan Steven A. Cohen. It started the year with about $12.5 billion and now runs more than $8 billion. The current figure includes $2.75 billion in emergency funds Citadel LLC, its partners and Mr. Cohen’s Point72 Asset Management injected into the hedge fund last Monday.

As part of the deal, they got noncontrolling revenue shares in Melvin for three years. So far, Citadel, its partners and Point72 have lost money on the deal, though the precise scope of the loss was unclear Sunday.

Melvin Capital lost 53% of it’s value in one month. That comes out to about $3.5 billion. Hardly enough to crush the system, but certainly enough to send a message about predatory short selling.

Things got so bad that Melvin Capital had to be bailed out by Citadel and other sources. Even still, all those involved are still losing money hand over fist. That’s because the Reddit users are “holding,” something that has become their rallying cry. As long as they don’t sell, and the price of GME and other targeted stocks stay high, the hedge funds will have to keep floating their shorts or eventually just take the massive loss.

I would assume that the manipulation by the trading sites late last week, including forcing the sale of GME stock by retail users, allowed enough of a reposition by the hedge funds to limit their future losses. Despite that, the game is still on, and there is likely blood left to the drawn.


TOPICS: Business/Economy; Conspiracy; Society
KEYWORDS: gamestop; hedgefunds; melvincapital; reddit
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1 posted on 01/31/2021 5:10:52 PM PST by SeekAndFind
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To: SeekAndFind

After seeing the major players suspend the purchase of gamestock, coupled with the SECs lack of action, I hope the hedge funds lose evey penny they have.


2 posted on 01/31/2021 5:15:31 PM PST by RBW in PA
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To: RBW in PA

Not to mention Robinhood selling people’s stock without permission at the lowest price of the day to help said hedge funs.


3 posted on 01/31/2021 5:21:11 PM PST by Husker24
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To: SeekAndFind

The game is rigged. They will be after your retirement funds again.


4 posted on 01/31/2021 5:22:32 PM PST by mountainlion (Live well for those that did not make it back.)
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To: SeekAndFind

I have no love for the hedge funds, but I do feel bad for the regular Joe’s that bought GameStop shares at too high a price and who will suffer losses as well. Much smaller losses, of course, but it will hurt them nonetheless.


5 posted on 01/31/2021 5:22:36 PM PST by jdsteel ("A Republic, Madam, if you can keep it." Sorry Ben, looks like we blew it.)
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To: SeekAndFind

Do it now before Biden’s puppet masters put a stop to this. I think by the end of next week “retail” trading will be completely outlawed.


6 posted on 01/31/2021 5:23:46 PM PST by Organic Panic (Democrats. Memories as short as Joe Biden's eyes. )
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To: SeekAndFind
"Melvin Capital lost 53% of it’s value in one month. That comes out to about $3.5 billion."


7 posted on 01/31/2021 5:24:06 PM PST by Bonemaker (invictus maneo)
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To: SeekAndFind

My son is a freshman finance major at one of the oldest universities in the country. He sent us a text a week ago saying “Inside tip: buy all the GameStop you can!”

We said yea, right. And did nothing.

He put everything he could from his Schwab account into it.

Friday, he told us he sold, and how much he made. In a week, he made more than I did in a year of my first job after of college.

The world is a lot different than it used to be.


8 posted on 01/31/2021 5:26:31 PM PST by Bartholomew Roberts
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To: SeekAndFind

On a brighter note......we’re just getting started. Once it is discovered what 4 million can do with their wallets.......there is all kinds of mischief we can get into.

Like...turn Wal-Mart OFF.


9 posted on 01/31/2021 5:28:30 PM PST by Salvavida
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To: SeekAndFind

bookmark


10 posted on 01/31/2021 5:28:39 PM PST by GOP Poet (Super cool you can change your tag line EVERYTIME you post!! :D. (Small things make me happy))
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To: Salvavida

LOVE IT!!!!


11 posted on 01/31/2021 5:29:17 PM PST by GOP Poet (Super cool you can change your tag line EVERYTIME you post!! :D. (Small things make me happy))
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To: SeekAndFind

I like this story about Gamestop trading because it ultimately tests how much regulation Joe Biden will pursue. Will Biden add more regulations on trading on the premise that it’s good for combatting climate change? Will more regulations on trading be added because it deals with racial inequality? Those added regulations will be thrown out in the courts.


12 posted on 01/31/2021 5:35:37 PM PST by convoter2016
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To: SeekAndFind

if my overall portfolio is not in hedge funds should I be worried.


13 posted on 01/31/2021 5:36:57 PM PST by Jolla
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To: Salvavida

Amazon? God how I wish that stock would sink to hell!!


14 posted on 01/31/2021 5:37:25 PM PST by RoseofTexas
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To: Salvavida

“Once it is discovered what 4 million can do with their wallets.......there is all kinds of mischief we can get into.”

How about 70 million patriots?


15 posted on 01/31/2021 5:38:59 PM PST by polymuser (A socialist is a communist without the power to take everything from their citizens...yet.)
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To: SeekAndFind

So hedge funds are losing money because they’re betting that Gamestop stock will go down? But who are they making bets with?


16 posted on 01/31/2021 5:40:51 PM PST by MinorityRepublican
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To: Jolla
No, but the shorts are "exposing the business" and could cause serious damage throughout the market.

Large percentage of companies have high P/E ratios, not fundamental at all, even for tech stocks where a high P/E is the norm AT TIMES. Massive amount of artificial pumping has caused some worries that transcend historical threats.
17 posted on 01/31/2021 5:41:14 PM PST by rollo tomasi
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To: SeekAndFind
As long as they don’t sell, and the price of GME and other targeted stocks stay high, the hedge funds will have to keep floating their shorts or eventually just take the massive loss.

Floating their shorts costs money, more money the longer it goes on. The smart ones have ripped the band-aid off and taken their losses. The rest will hemorrhage until somebody blinks or - watch it happen - the feds decide to come to the rescue of their heavy donors.

18 posted on 01/31/2021 5:44:47 PM PST by Billthedrill
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To: SeekAndFind
I like the sound of this:

"Despite that, the game is still on, and there is likely blood left to the drawn."

19 posted on 01/31/2021 5:44:48 PM PST by blam
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To: polymuser

That comes later. I imagine 15 million are prepared to do their worst tomorrow. Then momentum increases. Mass x Velocity.


20 posted on 01/31/2021 5:45:49 PM PST by Salvavida
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