GameStop’s stock price continued to soar in after-hours trading last night to over $300. While many are waiting for it to come crashing back down, it might be too late for some major hedge funds. With the stock still sitting at well over $250 a share (unthinkable just last year when it was trading at under $5) after the market reopened, Melvin Capital, one of the largest hedge funds betting against the company, is reportedly getting out of the game after suffering major losses, seemingly driven out by amateurs trading on their phones and joking on Reddit in what continues to be one of the most bizarre stories of 2021 so far.
“Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss,” the fund’s manager told CNBC this morning.
The firm, which was worth about $12.5 billion before the battle between short sellers and Redditors began, bet big against GameStop and a number of other companies, only to see 30% of the fund disappear over the last few days. That prompted other billionaires to swoop in and lend Melvin $2.75 billion to help cover the losses. Andrew Left, a notorious short-seller activist, also announced in a new YouTube video today that his investment firm moved away from most of its bets against GameStop’s stock at “a loss of 100%.”
Update – 6:28 p.m. ET, 1/26/21: Closing over $145 after another record day, Bloomberg analyst Eric…
Those on Reddit who helped orchestrate GameStop’s recent record-breaking ride on Wall Street aren’t buying it, however.
“Melvin capital have not closed their positions!!” a user posted in one of today’s most upvoted threads on the WallStreetBets subreddit, “The volume is too low for it to be even possible. The short interest has not changed!”
The forum has been full of comments like this as Reddit traders try to rally one another to drive GameStop’s stock price even higher, rather than cashing out now.
Meanwhile, the ensuing chaos caused GameStop stock trading to be temporarily halted yet again this morning and caused outages on the trading app Robinhood. Other companies like Blackberry and AMC are also seeing smaller, though still dramatic stock climbs, as Reddit traders attempt to go boost other companies massively shorted by big hedge funds.
This content was originally published here.