Is Melvin Capital Done For?
Idk how many of you have been following, but GME might be the biggest short squeeze since Tesla. Yesterday, there was an epic gamma squeeze because MMs sold 60 0dte calls (up over 20,000% at one point), which might only be the beginning. Now, the short float right now is absolutely insane, and I know that Melvin Capital is down something like 15% already from this bet (or a combination of this and other positions). Literally every single call option Friday expired ITM, so it appears that brokerages will be offering 115 1/29 calls at Monday's open. Given how much retail loves risk, I cannot imagine that this will not eventually happen again, especially because MMs can't be caught with their pants down selling 115 naked calls. And then with the gamma squeeze initiated, that will trigger the inevitable short squeeze that has been building. There might even be a 1% chance this causes a credit crisis due to some MM blowing up and spreading across the entire industry. Either that or just the fact that millions of WSB retards will be buying shares at Monday's open might send this to the moon. My apologies for turning WSO into WSB, but I thought this was very interesting and we are in for a crazy week ahead. Thoughts? Are bears doomed?
Go back to reddit..
What’s wrong with discussing this here? Understanding of what’s going on in these subreddits is quite important given the impact?
Exactly- given that this affects firms that I'm assuming many WSO members work at, I don't see why this can't be discussed
This is going to be one of the most legendary profile hedge fund failures of all time and we're literally on "Wall Street Oasis." If anything this is the MOST appropriate place to be discussing this lol
Totally agree 💎🙌
They’re going to be fine...the bigger question is which analyst(s) and/or PM(s) is getting shit-canned next week?
Melvin is a SM firm, and honestly, was more bad luck/timing regarding this specific trade. That being said, the fund has been underperforming the whole year, so who knows.
I have an old professor who is personal friends with Gabriel and brought him in for several lectures during the semester. I'm tempted to reach out and ask how he's doing, but also low key gloat that his genius friend's epic failure has made me a multi-millionaire...
What’s also funny is that one of Melvins best investments was Chewy
Wait are you serious? No. Fucking. Way.
Nah, they'll keep getting bail outs from their billionaire hedgie friends. But are they in for a wild week? Hell yes, and they should've never taken this much risk in the first place.
I'm more worried about contagion if Melvin's position becomes untenable, who else is going to be hurt by their misfortune?
They closed out of their position Tuesday afternoon. They’re not going out of business.
They said they closed their position anyway...argument to be made they don't have much of a reason to announce it if it is the case, but have a lot to gain if people start selling off and they can cover at lower prices.
While I agree that there is clear motive, that would be textbook market manipulation. There is no escaping the SEC after a public announcement like that. I don’t know if they’re stupid enough to do that.
lol it's hilarious watching CNBC complain about reddit autists as if they are a Nazi-Commie Zombie invasion
From Wizard of Soho on Instagram...
"For years and years CNBC let hedge fund managers come on their talk shows and pump up their books and make retail guys buy their stocks then dump on them. Hedge funds manipulate prices all the fucking time. For the first time in history... the regular retail investor has the balls of hedge funds by the hands squeezed up and CNBC and all their moderators are calling it stock manipulation and making every retail investor look bad and vilifying an entire community because their hedge fund daddies who come on their show are about to lose it all. Fuck you CNN. Melvin Capital got a 2.5 bn bailout injection a few days ago. What happens when the retail trader lost everything in 2008 or March 2020 or in regular trades everyday. Who came and put money in your bank account. Nobody. No fucking body. Fuck you Jim Cramer and Andrew Sorkin for putting down the retail guy who is putting his life on the line for some hedge fund fuckers who did not hold their fiduciary responsibility and now you are willing to plant fake stories to manipulate prices for them. You should be put in jail and have your money gone."
"We ride to fucking Valhalla on the tears of Melvin Capital and Cohen"
*edited for full quote
Based 🙌 💎 🚀
Have so much respect for Tom Keane & Jonathan Ferro calling out the elitism.
Deep fucking value is the analyst of the decade
Shame cause Melvin were one of the best solo managers, now they are about to become Steve Cohen & Ken Griffins bitch
They'll be fine. They closed their position, received a multi-billion dollar bailout from fellow HF investors. Plus they are investing other people's money anyways
Yes that's the sad part. It's a win for the small guys on reddit, a loss for big billionaire hedge fund managers, but also a loss for people who invest in those hedge funds. It could be a pension fund for teachers, nurses, etc.
Exactly. It's also why I love when people say HF is "risky." Yea maybe for the pension funds who invest in you. But risking other people's money isn't "risky" (I totally acknowledge that PE is the same thing, before people call me a hypocrite)
There's no way that their employees also haven't lost a shit ton. Yes, all or almost all will be fine in the sense that they won't starve to death, but this will be a career ender for some of them.
They will lose out on bonuses this year, but they all made tons of money in previous years taking on the same bets without any sense of risk management. Anyone below PM will have no issue finding a new job (I've seen this play out many times before with peers whose funds have blown up). PMs...who knows, but maybe they will learn a valuable lesson on the importance of risk management
.
If that's the case they are looking at multiple law suits from redditors and also SEC, plus the $13 billion they will lose.
They got nothing to lose at this point, eh?
Do you believe in Qanon too?
lol you think a hedge fund with 12 billion AUM can lose 6 billion + and "be fine"?? investors will pull out all their money, Gabriel will be known as a joke in the investing world, and not to mention the hedge fund has already gone bankrupt. in terms of individual net worth, yes they'll be ok, but Gabriels career will never fully recover from this
Good point and realizing now that I should've clarified - Melvin Capital probably won't be ok, but most of the employees there are fine. They'll get new jobs in short order. This happens all the time and it's only the PMs who take on way too much risk that have trouble getting back on track.
Gabe may not recover simply because he doesn't know anything about risk management. If he did, he wouldn't have held onto the position for that long. He'll be known as a joke because the call he made on this stock tells the whole story. Of course, he'll still be rich because he has gotten away with taking on this type of risk for so long. Maybe there's a lesson in there...
Again, it's not his money, it's other people's money. None of these guys/gals will see any meaningful decline in their own bank accounts. That's why they are "fine." It's the pension funds that trusted this idiot that are seeing real losses.
Any one know how much Melvin is down now? Over 50% I heard down 70 by some of the posters...
I've seen people post 70% YTD. Don't have a source though, it was a picture with a bunch of other HFs that were also down big percentage points, up to 40% if we exclude Melvin.
I thought they closed out of their positions when they were down 30% though? So how are they down 70% now?
"Ortex estimated that short-sellers were on track for losses of about $19.04 billion as of Friday"
https://markets.businessinsider.com/news/stocks/short-sellers-sitting-o…
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