Two billionaires are bailing out Melvin Capital, a firm that has lost a ton of money shorting GameStop. Stepping into a fight with a social media whirlwind is line of duty no.
Steve Cohen's Point 72, Ken Griffin's Citadel, and other partners are plowing a total of $2.75 billion into Melvin Capital, the hedge funds said on Monday. They will receive non-controlling revenue shares in Melvin in return for their money.
Melvin will welcome the cash injection as painful short bets have left it down 30% year-to-date as of Friday, The Wall Street Journal reported.Scores of retail investors, including some members of Reddit forum r/wallstreetbets, have targeted heavily shorted stocks in recent weeks. They drove GameStop's stock price up as much as 145% on Monday, Bed Bath & Beyond up 58%, BlackBerry up 48%, and AMC up 39%.
Melvin takes more negative positions than most of its Wall Street rivals, exposing it to potentially heavy losses. It owned "puts" – bets that a stock price will fall – on 17 US-listed companies including GameStop and Bed Bath & Beyond at the end of September.
