![]() ![]() The WSJ reported in February that hedge fund Citadel LLC, which gave Melvin Capital about $2B when it was struggling from its short bet on GameStop ( GME) last January, was again paring its investment in the fund.īloomberg reported in March that Steve Cohen's Point72 planned to redeem its investment in Melvin Capital in increments over time. The Melvin fund was down 23% through the end of April, according to reporting from CNBC's Leslie Picker. I now recognize that I need to step away from managing external capital.” “I have given everything I could, but more recently that has not been enough to deliver the returns you should expect. ![]() “The past 17 months has been an incredibly trying time for the firm and you, our investors,” Plotkin wrote in a letter seen by Bloomberg. The news comes after reports last month that Melvin was going to try to salvage the fund by starting a new fund with the money his investors decided to reinvest, though the plan was nixed after getting negative feedback from investors, according to media reports. Melvin's assets were $7.8 billion as of the end of last month with the majority in the hedge funds. Melvin, run by Gabe Plotkin, plans to shut down and return cash to investors, according to media reports from Bloomberg and CNBC. Melvin Capital, the hedge fund that was pummeled by the GameStop ( GME) short squeeze last year, is said to plan to wind down. It is a sharp contrast to what is happening in our country where technology is being used to launch surveillance on the citizens, which stifles democracy and disempowers the people.Update 9:40am: Updates to include details that Melvin's positions have already been liquidated. This drew strong criticism from across the political spectrum – I have never before seen Republican Senator Ted Cruz agree on any topic with Democratic Representative Alexandria Ocasio-Cortez, that too without any debate or discussion!įor me, this is a good example of how technology, when used effectively, can help take the power into the hands of the people – it can be leveraged to deepen democracy and people’s participation in decision-making. Ironically because Robinhood took from the rich and gave it to the poor! It seemed like the “free market” was suddenly too free for these platforms, and they wanted some self-regulation to reign in this ‘free for all’. Some have called this the David and Goliath story, others decided to have a laugh at the expense of the hedge fund moguls but one of the most popular trading apps, Robinhood, ironically decided to crash the party by blocking buying of GameStop stocks (and a few others). Free trading apps (like Robinhood) which are used by amateur investors for trading on the stock market. Reddit (specifically the chat room WallStreetBets) provided the forum for the retail investors to discuss and coordinate the action, so that together they had enough funds to match the deep pockets of the hedge funds. This was facilitated by two tech platforms in particular. Led by Keith Gill, they started buying the stock resulting in an increase in its value on the exchange, causing a short squeeze for the Hedge Funds and losses in billions of dollars.įor me, the main takeaway is how technology has allowed retail investors to do what hedge funds have been doing for years – legally manipulate the stocks to make millions of dollars at the expense of others. Members of a popular community on Reddit dedicated to the stock market for retail (individual) investors, called WallStreetBets, found out about this. A few Hedge Funds, including Citron Research and Melvin Capital, saw an opportunity and decided to short the company’s stock to make money. GameStop is a brick-and-mortar enterprise which was already losing market share to online stores and the pandemic hurt them further. Not least of all the wealthy who, some would say, are whining that this form of “free market” is against the wealthy!Ī simple search on the internet will provide multiple articles explaining what happened like this one by Huffpost. So when it did happen last week at the New York Stock Exchange, everyone sat up and took notice. How often do we read about middle income individuals appropriating the wealth from the super-rich using the very systems that they have created in order to become and stay wealthy? Not very. ![]()
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