We now know how much money Melvin Capital lost on GameStop and other bets

Written by: Jayson Derrick
January 31, 2021
  • Melvin Capital, a hedge fund that bet against GameStop's stock, lost billions of dollars in January.
  • The fund entered 2021 with $12.5 billion in capital.
  • Including a $2.75 billion cash infusion, Melvin ended January with $8 billion.

Melvin Capital, the hedge fund made famous through its bet against GameStop Corp. (NYSE: GME) lost more than half of its funds in January, according to The Wall Street Journal

From $12.5 billion to $8 billion

Melvin Capital, the hedge fund started by Gabe Plotkin, entered 2021 with $12.5 billion in capital. But heading into the first trading day of February, the hedge fund is overseeing more than $8 billion — a figure that includes a $2.75 billion cash infusion from Citadel, its partners, and Plotkin’s former employer, Steven cohen’s Point72 Asset Management.

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Citadel, its partners, and Point72’s cash infusion closed last Monday and their investment is already in the red. However, the size of the loss is not immediately known, according to WSJ.

Yet despite a very rough start to 2021 by every measure, Melvin has attracted both new and existing clients to invest capital at the start of February, a source told WSJ. 

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Losses extend beyond GameStop

Melvin Capital’s multi-billion dollar loss to start 2021 was fueled by more than just GameStop, according to WSJ. According to the fund’s most recent regulatory disclosure, we can see now that its bearish bets have since moved in the wrong direction.

At the time of the last disclosure, the fund held put options on Bed Bath & Beyond Inc. (NASDAQ: BBBY), GSX Techedu Inc (NYSE: GSX), and National Beverage Corp. (NASDAQ: FIZZ). Shares of the home goods retailer are higher by nearly 80% at their intraweek highs last week.

Shares of the China-based tutoring company were up 62% at its intraweek highs while shares of LaCroix’s parent company nearly doubled.

Ironically, Melvin’s long bets were down last week as well. The fund was long at the time of its disclosure two online travel agencies: Booking Holdings Inc. (NASDAQ: BKNG) and Expedia Group Inc. (NASDAQ: EXPE)

Booking’s stock was down just shy of 10% at its intraweek lows last week while Expedia’s stock was lower by more than 13%.

Other hedge funds feeling the pain 

Other hedge funds were down by double-digits, including Maplelane Capital that managed $3.5 billion at the start of 2021 and lost 45% in January, a source told WSJ. Dan Sundheim’s D1 Capital Partners, one of the top-performing funds in 2020, ended January down around 20%.

Moving forward, hedge funds are expected to shy away from highlighting their bearish positions in regulatory filings by invoking a Securities and Exchange Commission rule that lets them keep positions confidential. This would likely eliminate or drastically reduce having a target on their back.

Other hedge funds might introduce new rules and risk management parameters that would prevent managers from touching thinly traded and/or heavily shorted stocks.