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Hedge fund Melvin sustains 53% loss after Reddit onslaught

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Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#71

Post by cj »

motohagiography wrote: post #58

%53, so far. The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. It's literally everything those funds can sell, borrow, and get bailed out to cover their position. My prediction last week was this has system wide implications, and I'm thinking 1. the Fed will intervene, leverage Robinhood's EULA, and buy out everyone's shares at a price th…

> The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite

There’s a significant amount of disinformation regarding the 140% figure and what it means in practical terms.

I’m curious, do you see a difference between a stock with 99% short interest vs. 101% short interest? If so, what is the difference?

(In my mind, there’s no difference - curious if you see it differently)

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#72

Post by jonnyone »

nickysielicki wrote: post #32
Judgmentality wrote: post #11

Earlier quoted context omitted.

The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions. I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock. Considering this is a hedge fund, I just a…

The way that WSB has latched onto Melvin as their enemy is to their detriment. It was never about killing Melvin capital, or at least, it shouldn't have been. It ought to have been about the ridiculous short interest on the stock, regardless of who was funding it. Whether or not Melvin specifically has covered their shorts is irrelevant to how the short interest as a percentage of float has changed in the past week.…

>defy reason once again.

Nothing I've read about this hints that reason was ever defied. If anything reason was used cunningly.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#73

Post by mathattack »

motohagiography wrote: post #58

%53, so far. The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. It's literally everything those funds can sell, borrow, and get bailed out to cover their position. My prediction last week was this has system wide implications, and I'm thinking 1. the Fed will intervene, leverage Robinhood's EULA, and buy out everyone's shares at a price th…

This isn’t that big a deal. LTCM was levered up 100 to 1 when it got bailed out on its 3 billion notional. Bear and Lehman were levered up 30 to 1 on their billions of assets. I don’t see that kind of leverage or counterparts risk here. A hedge fund or two blows up. Maybe they take a small investment bank with them. The system can survive that shock.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#74

Post by fractionalhare »

djeiasbsbo wrote: post #67
fractionalhare wrote: post #49

Earlier quoted context omitted.

> My theory is that they are not only doubling down but quadrupling down everytime the stock shoots up. They would not have survived Monday, Tuesday or Wednesday if they doubled down once instead of closing out, let alone if they did it on every significant increase. Even if you cite the investment from Point72 and Citadel: that's a fraction of what they'd have needed to survive the stock going from $100 to $300+.

They could have. If they shorted again on tuesday at >300 they could have made a lot of money by covering the next day when the price dropped due to the buy restrictions. At one point in the aftermarket the stock even hit 500$ and the next day went back down to 190$. That is potwntially a lot of money for the right short positions.

This is extremely unlikely. I'm saying they wouldn't have survived to see $300. You think they managed to live long enough to short at the top tick without being margin called and having their prime broker pull the plug on them?

The doubt around this situation is uncritical. This is a firm motivated by money. If you're seriously interested in making money, you don't lie to the public about closing your positions (boom, securities fraud) and stay in it when the volatility of the thing has destroyed your thesis (boom, breaking fiduciary duty). You get out to trade another day.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#75

Post by icedchai »

newacct583 wrote: post #14
wrkronmiller wrote: post #5

> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. The firm moved to reduce risk in its investments following a turbulent start to January when it lost 30 percent in the first three weeks. Melvin’s leverage ratio is at the lowest it has been since the firm’s founding in 2014, said a source familiar with the firm. The news of Melvin’s January performance was first reporte…

The stock is currently around $300, up by a factor of five from last week and much more than that over its historical base. The question should be who isn't shorting GME, not leading questions about a conspiracy theory as to whether or not Melvin actually closed its shorts or not. I mean, I haven't shorted GME personally. But I've absolutely joked with friends that it's an obvious play. Maybe I should.

It seems less risky to buy puts, not short directly. I wouldn’t want to be short if this goes up another 10x, even briefly. It will go back down but you might get wiped out first.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#76

Post by RivieraKid »

motohagiography wrote: post #58

%53, so far. The problem with the short interest being %140 is that the notional value of shares to cover that extra %40 is in fact, infinite. It's literally everything those funds can sell, borrow, and get bailed out to cover their position. My prediction last week was this has system wide implications, and I'm thinking 1. the Fed will intervene, leverage Robinhood's EULA, and buy out everyone's shares at a price th…

"True" short interest is much lower - 55% - if you take into account that shorting creates new virtual shares. It's like fractional reserve banking.

https://twitter.com/ihors3/status/1355969693841051650?s=19

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#77

Post by elif »

ajross wrote: post #62
Teever wrote: post #48

Earlier quoted context omitted.

> they don't take paid ads from their guests. How do you know this?

They sell journalism under the NBC brand. Is this a serious question? If CNBC was issuing paid advertisement like that it would be a much, much bigger story than a spike in a small cap retail stock.

NBC has double the primetime product placement of it's next nearest competitor, fox.

https://ufdc.ufl.edu/UF00101603/00001

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#78

Post by CivBase »

PurpleFoxy wrote: post #47
viraptor wrote: post #39

Earlier quoted context omitted.

And you did just that without referencing either Reddit or memes.

Not mentioning reddit hides information. News companies should aim to tell us as much as possible what is actually going on. And the reality is the current situation is heavily tied to a specific group on reddit. People are also directly visiting the subreddit and they will struggle to understand what is going on which is why the news tries to provide translations and explanations.

> News companies should aim to tell us as much as possible what is actually going on.

Key phrase: "what is actually going on". The humor and manner of speech of that subreddit has nothing to do with what is actually going on. It's just superfluous details intended to discredit them without having to explain what is actually going on.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#79

Post by mmahemoff »

ihunter2839 wrote: post #57
kyrieeschaton wrote: post #29

How much evidence is there that the "reddit onslaught" actually moved the price, as opposed to them being the stalking horse for more sophisticated actors with more capital exercising a vanilla short squeeze strategy?

Could you elaborate a bit on what you mean by this? I have seen similar comments elsewhere but don't really understand what is being suggested.

The media portrays it as "Redditors take on hedge funds". In reality, the volume indicates there's hedge funds, as well as a broad group of retail investors from outside Reddit, who have all jumped on the train. Hedge funds are on both sides of this.

Re: Hedge fund Melvin sustains 53% loss after Reddit onslaught

#80

Post by briefcomment »

smabie wrote: post #51
briefcomment wrote: post #34

Earlier quoted context omitted.

Edit: This is probably wrong. The funny thing is that the money Citadel makes off of Robinhood is basically front running RH trades. If those trades are for GME, Citadel has to choose between: - getting their front running revenue while increasing the price and making things worse for shorts (which I'm sure Melvin still has, despite their PR) - foregoing their RH revenue to not exacerbate the situation for shorts Pic…

Citadel is not front running trades. This isn't how PFOF works. People say this over and over again, but it just shows that they have little to no understanding of how a market maker operates. Which is fine, everyone is uninformed about some things. Except if you know nothing about something, you shouldn't post naive statements that you claim as factual, when they are in fact not.

You’re right that a lot of people say this. And not just random people, but people with large audiences, and people who presumably have some expertise.

What is Robinhood’s relationship with Citadel then?

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