Hedge fund giants Steve Cohen and Ken Griffin join forces to rescue a fellow trader whose positions in runaway stocks like GameStop have been hammered.
Griffin’s Citadel and Cohen’s Point72 Asset Management are investing together $ 2.75 billion in Melvin Capital Management, whose recent bets on stock declines were foiled by a small army of fast-dreaming investors.
The fund, which is run by ex-Cohen Lieutenant Gabe Plotkin, is down 30 percent, according to the Wall Street Journal.
The bailout comes from retail investors flooding online forums like the Reddit board « wallstreetbets » to get each other to invest in cheap stocks with short positions against them through toll-free trading sites like Robinhood.
GameStop, which Plotkin was betting against, had a short interest of 102 percent of its outstanding shares on Friday, making it a primary goal to send a stock higher through a so-called short squeeze.
GameStop’s shares rose around 178 percent between Thursday’s close and early day of trading, as investors pressured short sellers like Plotkin and Andrew Left, who complained last week that they were under threat over his predictions that the stock would fall.
« He was briefly in a market where people can no longer stay briefly, » complained one hedgie. “Today you take a position after work, then some people on Reddit use their phones to buy penny stocks and you end up getting your face ripped off. It’s crazy. «
» I’ve known Gabe Plotkin since 2006 and he is an exceptional investor and leader, « said Cohen, who will increase his existing investment in the fund by $ 750 million. » We are excited to have the opportunity to invest additional capital and take over a non-controlling portion of the revenue in Melvin Capital. «
Melvin Capital grew 47 percent in 2019 after losing money in 2018. About a third of Point72’s 2019 performance results from it his $ 1 billion stake in Melvin.
Griffin and Cohen have fought openly to trade talent in the past, and Griffin even hired and then fired Cohen’s brother-in-law at Citadel.
But Plotkin – and hopes he will recover from the chaos – appears to have united the two men.
« Gabe Plotkin and his team have achieved extraordinary results in the history of Melvin, » said Gri ffin in a statement to The Post after confirming that Citadel and its partners will pump $ 2 billion into Melvin’s books. « We have great faith in Gabe and his team. »
« If Ken Griffin gives Gabe $ 2 billion to Plotkin, he’s not doing it to be a nice guy, » said another hedge fund manager. « He clearly believes Plotkin will jump back. »
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