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Hedge fund Melvin sustains 53% loss after Reddit onslaught

arstechnica.com

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

#231

Post by pb7 »

londons_explore wrote: post #60
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 general assumption on WSB is that Melvin Capital is lying If a company issues a commercial press release that turns out to be a deliberate lie, doesn't that usually result in prison time for someone? Were there ambiguities in the statement?

Can you link to this press release?

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

#232

Post by briefcomment »

gruez wrote: post #208
briefcomment wrote: post #170

Earlier quoted context omitted.

That's fine if market makers stick to the rules. What do you make of some of what Citadel has done before? https://www.bloomberg.com/news/articles/2020-07-21/citadel-s... https://www.sec.gov/news/pressrelease/2017-11.html

There were no allegations that they provided a worse price than the NBBO (ie. the price you'd get if there wasn't PFOF), just that out of all the firms offering PFOF, robinhood didn't choose the best one for their customers.

Did you read the SEC release?

“But the SEC’s order finds that two algorithms used by Citadel Securities did not internalize retail orders at the best price observed nor sought to obtain the best price in the marketplace”

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

#233

Post by esyir »

nradov wrote: post #187
ClumsyPilot wrote: post #169

Earlier quoted context omitted.

"My theory is that they are not only doubling down but quadrupling down everytime the stock shoots up. " You can do the same at a casino - double your bets every time you loose. The technique works, 100%. The trouble is, it requires exponential amounts of money. "We have no way of knowing if people posting gains on wsb are doing it on paper accounts or not." That's starting to sound a lot like "moon landing was faked…

That technique doesn't work at the casino. Even if you had a huge amount of capital the house still has a slight edge so if you keep playing long enough you'll eventually lose everything.

It does, but as he said, only under ideal conditions. I.e.: No limits to bets and infinite base money.

Both of which clearly don't exist.

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

#234

Post by wyre »

BoorishBears wrote: post #220
sroussey wrote: post #209

Earlier quoted context omitted.

It’s the retail volume that is breaking things, but yeah other are riding momentum.

Exactly as I said... this is not just retail. Not 20B in a single trading day.

That’s 4 million people averaging $5000. It could be?

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

#235

Post by flunhat »

drcross wrote: post #217
fractionalhare wrote: post #64

Earlier quoted context omitted.

With respect, you haven't thought this through. Given there is "so much riding on this", why do you think a hedge fund would concoct a nefarious, extremely uncertain scheme to get people to think they closed instead of actually closing? You agree they're motivated by money, right? They would have lost literally all their money, even with the additional investment, if they were still in when GME soared to $400. They w…

>why do you think a hedge fund would concoct a nefarious, extremely uncertain scheme to get people to think they closed instead of actually closing? Because they haven't closed their positions, and that information would tip shareholders into thinking they might release some profit before the price levels out. >They would have lost literally all their money, even with the additional investment, if they were still in…

> If you really think this through, why would they actually announce they have covered the shorts instead of simply reclaiming a short position?

This is paper thin logic. If they hadn’t said anything publicly, you and others would be commenting, “See! Melvin Capital hasn’t said anything, so they’re still shorting GME.” It is incredibly common for investors involved in public battles over a stock to announce they’ve closed a position, see Bill Ackman and Herbalife (https://www.investopedia.com/news/billionaire-bill-ackman-du...)

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

#236

Post by CTDOCodebases »

ogre_codes wrote: post #214

Most stunning thing in this article to me: "The GameStop saga marks a fall from grace for Melvin, which gained 52 percent last year, ranking it among the best performing hedge funds ." This is kind of surprising. I personally know a few retail investors who crushed that number. Not with fancy day trading, just owning a few good companies. I know it's a lot harder for institutions to get outsized returns, I just didn'…

Bull market gains are easy to brag about. It’s high year to year gains over varying market conditions that is the goal.

Though you could argue the hedge funds failed to see the influence of the retail investors entering the market and missed out on the gains.

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

#237

Post by fractionalhare »

drcross wrote: post #211
qeternity wrote: post #173

Earlier quoted context omitted.

Why do you think short squeezes happen? It’s not because shorts are being insane and covering. They are literally forced to. You have buying for reasons that aren’t commercial and that’s why short squeezes are so bloody.

These are naked shorts, more shares are shorted in GME than exist in the company.

That is not what naked means. Naked short sales are short sales without an executed or agreed upon borrow between the borrower and broker. You are referring to short interest higher than 100% of the float (total shares in circulation), which is mundane because it happens organically when a lot of people want to short the same thing and start borrowing shares which were already sold short.

It seems entirely unsurprising to me that a brick and mortar retailer selling digital goods in the middle of a pandemic would be a hot short target for many different funds, thereby organically pushing short interest over 100%.

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

#238

Post by bugzz »

BoorishBears wrote: post #201
robbomacrae wrote: post #91

Earlier quoted context omitted.

So many conspiracy theories on both sides these days. Don't forget Ocram's razor. I don't think there are many sophisticated actors here at all. I'm speaking as one who did DD on GME back in September and throw some money in (thought it was a great opportunity mainly because of Cohen + the upcoming console super cycle with a tiny chance of squeeze thrown in) It was a smart discovery by WSB and got a bit more than ave…

20B in volume in a single trading day and people still think this is just retail. Sheesh.

2-3 weeks ago when share prices were around $17, GME had a market cap of less than 1.2B. WSB has 7.6 million users now, but I assume it went up a lot recently. Say 2 million of them bought some GME. To buy 50% of the shares a couple weeks ago it would have only taken $296 each. So they could ABSOLUTELY get prices moving significantly. Now of course lots more people have jumped on now. But that 20B volume number is after they got the price to ramp up!

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

#239

Post by blackrock »

I can’t imagine that a bunch of millennials buying and holding 5 shares of stock on GME is causing this. They’re just getting the blame for it.

Instead, I think other hedge funds are in the water. The sharks are circling and they’re battling each other. One side is shorting. And the other side is going long.

The volatility on this stock is great. And you can play both sides. And the market makers makes money on both sides too!

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

#240

Post by gruez »

briefcomment wrote: post #232
gruez wrote: post #208

Earlier quoted context omitted.

There were no allegations that they provided a worse price than the NBBO (ie. the price you'd get if there wasn't PFOF), just that out of all the firms offering PFOF, robinhood didn't choose the best one for their customers.

Did you read the SEC release? “But the SEC’s order finds that two algorithms used by Citadel Securities did not internalize retail orders at the best price observed nor sought to obtain the best price in the marketplace”

Presumably

> [...] the best price observed [...]

> [...] the best price in the marketplace [...]

refers to the prices that they can get through all sources (ie. including PFOF firms aka market makers), not just NBBO.

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