Steve Marcus / Reuters
- Steve Cohen’s Point72 and Ken Griffin Citadel are investing $ 2.75 billion in Melvin Capital.
- Melvin is down nearly 30% this year as its short positions take a big hit.
- Day traders have bid on GameStop, Bed Bath & Beyond stock prices and other popular shorts.
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A pair of billionaire investors is swooping in to support a short-selling hedge fund in its battle against an army of day traders.
Hedge funds said on Monday that Steve Cohen Point 72, Ken Griffin Castle and other partners are spending a total of $ 2.75 billion in Melvin Capital. They will receive non-controlling revenue shares in two files for their money.
Melvin will welcome the cash injection because the agonizing short bets have left it down 30% year-to-date starting Friday, The Wall Street Journal reported.
Dozens of individual investors, Including some members of the Reddit forum r / wallstreetbets Targeting short stocks the most In recent weeks. They drove GameStop’s stock price Up to 145% On Monday, Bed Bath & Beyond was up 58%, BlackBerry was up 48%, and AMC was up 39%.
Melvin is taking more negative trades than most of his Wall Street rivals, exposing him to potentially huge losses. It owned “puts” – betting that the share price would go down – on 17 US listed companies including GameStop and Bed Bath & Beyond at the end of September.
The company’s strategy has paid off in the past. Melvin has returned at a rate of 30% annually since its founding in 2014, and its assets under management have grown to $ 12.5 billion at the start of this year.
Gabe Plotkin, a former star portfolio manager at Cohen’s SAC Capital, resigned to start Melvin in 2014. Cohen has been seen as supportive of Day 1.
