A GameStop Corp. Stores in Rome, Italy on Thursday, January 28, 2021.
Alessia Pierdomenico | Bloomberg Getty Images
The Wall Street Journal quoted people familiar with the matter as saying, hedge fund Melvin Capital Management lost 53% in January amid a fund rally in game funds and other stocks.
Retail investors have been placed in popular hedge fund short targets in the form of heavy losses, including struggling video game retailers. Gametop shares ended the week up 400%, with 1,625% total returns this year. The stock closed the Friday session at $ 325. As recently as October it traded under $ 10.
CNBC’s Andrew Ross Sorkin reported last week that Melvin Capital closed its short position at Gametop on Tuesday afternoon after sustaining heavy losses. Citadel and Point72 invested close to $ 3 billion in funds to shore up their finances.
Melvin now has more than $ 8 billion in assets under management – including emergency funding – at the beginning of the year, about $ 12.5 billion, according to the Journal.
Last week’s activity at Gametop sparked other popular short targets, including Bed Bath and Beyond and AMC Entertainment, with retail investors turning to Reddit’s Walcritbats Forum to discuss various trades. The forum has seen its members triple to 6.5 million in just one week.
Amid the small squeeze, Robinhood and other brokerages have banned trading in some of the most volatile names, which can cause frustration for users who were unable to trade at will.
Robinhood said in a blog post that the central Wall Street clearinghouse ordered a tenfold increase in the firm’s deposit requirements in the week to experience an unprecedented volatility in securities to ensure smooth settlement of securities.
The meteoric rise in shares of GameStop has prompted some lawmakers to call regulatory bodies to intervene.
“We need an SEC, which has clear rules about market manipulation and then has the backbone to try and enforce those rules,” Sen. Elizabeth Warren, D-Mass. “For a healthy stock market, you have to beat a cop.”
Read more from the Wall Street Journal report.