Melvin Capital Closes – ETF Market

It turns out that it’s not easy to invest when the free money faucet is turned off. The fund that lost $ 7 billion in brilliance Gamestop (GME) He gave in and announced yesterday that Melvin Capital will be closing its doors permanently.

Melvin Capital, founded by Gabe Plotkin in 2014, became famous for its low pants last year when retail investors from the Wall Street Beats Board (WSB) Reddit created short squeeze on GME shares.

At the time, GME’s impossibly sell-offs accounted for 140% of GME’s float. This means that more shares that were not in the company’s possession were sold. This indicates the occurrence of so-called naked default, which is technically illegal.

It was alleged that big hedge funds like Melvin Capital shorted GME shares they didn’t actually own, driving down prices and shortening the spread, and then took more short positions to drive prices lower. Wash, rinse, repeat.

When WSB started buying GME shares aggressively, it drove prices up for the first time and forced short positions to cover their positions by buying GME shares and closing their short positions.

The only problem, with a 140 percent deficit, was not enough GME stocks. This caused the short companies to bid on each other and caused an epic short squeeze that caused the GME to rush from $17.25 to nearly $500 per share – that’s 30X!

Melvin Capital was destroyed and eventually rescued by parent funds Citadel and Point72.

This meant a huge loss for Plotkins Melvin Capital. Normally, the red chest would have to go back to the “high water mark” before it can start charging performance again.

However, Plotkin had a new idea… Last month, he wanted to switch to a new fund and get the high water mark back so he could start charging again. Investors reacted furiously, and Plotkin apologized shortly afterwards in a letter, calling the plan a “deaf tone.”

The final straw came when Melvin Capital again took a wrong turn due to the markets slump this year and lost another $2.3 billion. Ironically, a fund that was once known for its shortsightedness has missed its best selling time on the market.

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