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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

#81

Post by tpmx »

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…

> %53

What's with that weird way of writing a percentage numeric? Some weird "i'm an insider, trust me" signalling?

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

#82

Post by [deleted] »

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…

[deleted]

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

#83

Post by BoorishBears »

nimchimpsky wrote: post #44
BoorishBears wrote: post #15

Earlier quoted context omitted.

And the hedge funds making billions off that sentiment do as well of course, Citadel must be blushing at the runaway success of RH right now

Citadel is just a marketmaker that rh uses, they could switch all their flow to a different mm (who are doign the other 40% of flow already) easily. They don't own it.

Who said anything about ownership besides you?

You think they can't profit off their access to RH's order flow during a high volatility event like this? This is exactly what they pay for, to make maddening amounts of money off dumb money pouring in.

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

#84

Post by bedhead »

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 dead wrong.

Melvin got a margin call from their prime broker, which is why they needed to get bailed out abruptly by Griffin and Cohen. The mid-month injection shows how dire it was and how margin calls work. Hedge funds like Melvin typically use monthly accounting, so typically you can only add/withdraw capital for the first of the month. But margin calls are fire drills, all the sudden you get a phone call saying, "We need another $3 billion in equity or we liquidate your account" and you either sell stocks like mad (though even in this case I don't think it was an option) or pray you have a white knight sugar daddy like Griffin/Cohen to write a check literally overnight. Melvin had no choice but to cover, they couldn't start doubling down it doesn't work that way, they'd be done, and actually some of these stocks like GME were so volatile that it might even eat into the prime (but really the clearing broker).

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

#85

Post by A12-B »

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?

Well, what's the evidence of that then? I think the reddit behaviour explains what happened much better, and then everyone jumped on the train because of the groundwork they set.

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

#86

Post by Aunche »

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…

My theory is that Melvin sold their short positions to other hedge funds that have enough liquidity to weather the memestorm. Melvin itself is likely just trying to keep their other assets, so they can't afford the shorts. Now that the stock is obviously overvalued, the borrowing fee for GME is insanely high. Buying the shorts from Melvin would be an arbitrage opportunity.

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

#87

Post by gambiting »

tpmx wrote: post #81
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…

> %53 What's with that weird way of writing a percentage numeric? Some weird "i'm an insider, trust me" signalling?

In some languages you put the percentage sign at the front - like, in Turkish for instance[0].

I mean, it's not that weird. It's how currency symbols move to either front or behind of a number. Why is it $300 but 300zł?

[0] https://forum.wordreference.com/threads/percent-sign-positio...

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

#89

Post by 015a »

mathattack wrote: post #73
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.

I agree; its important to keep in mind that GME's total market cap, even after all of this, is only ~$22B. A 140% short position is bad (even if that's the real number, which I doubt), but in the scope of all things, not world-ending. Some hedge funds will die from this, and we'll probably have a few weeks of overall market downturn similar to last year, but we're not talking about "the entire US real estate market" here.

The US government could buy the entirety of GameStop at 3x its current price and it would barely quality for a line on the annual budget report.

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

#90

Post by mattkrause »

f430 wrote: post #42

It's really strange. Why would they openly announce that they have closed shorts and that they are sustaining damage so publicly? My theory is that they are not only doubling down but quadrupling down everytime the stock shoots up. Gamestop has no fundamentals going for it, take a look at its other competitors in the industry, they are all gone. Neither do cases for AMC (who themselves acknowledged and WARNED investo…

Was AMC in trouble before the pandemic?
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