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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

#131

Post by whateveracct »

Tenoke wrote: post #25
newacct583 wrote: post #14

Earlier quoted context omitted.

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.

Shorts aren't free. Even if you know a stock will eventually drop, benefiting from that is not quite so simple.

even in an obviously stupid situation like GME, timing the market is still timing the market.

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

#132

Post by SpicyLemonZest »

nprz wrote: post #114
dataflow wrote: post #101

Earlier quoted context omitted.

I wouldn't call it a conspiracy theory or call this out as an example of Occam's razor. > Collectively they can, and did, cause this.. no need to invent other actors to explain it. The thing is, people imagine this requires a lot of capital to pull off. How did WSB get so many people to invest so much into GME as to hit a hedge fund so hard? Do so many people really have that much money just to throw away? There is a…

I mean the WSB user count has grown from 2.2m on Monday to now 7.5m. If 5 million of those users all bought $100 worth of GME that's half a billion, if they bought $1000, that's 5 billion.

Over 700 million shares were traded last week, so even if every WSB user bought 10 shares, that wouldn't account for close to a majority of the activity.

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

#133

Post by lr4444lr »

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.

The Fed coordinated the LTCM buyout, but it was not public money, IIRC. A federal bailing out of a completely non FDIC insured private capital firm would be uncharted territory, I think.

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

#134

Post by cccc4all »

PurpleFoxy wrote: post #8

The best part about this whole situation is news companies having to translate crude reddit humour and logic in to something old people can understand. Seeing them trying to explain why billions of dollars move because of people who refer to themselves as retards who want to earn money to buy chicken tenders.

I laughed when CNN had to explain $Becky symbol and meaning of the term "wife's boyfriend".

https://www.cnn.com/2021/01/29/investing/wallstreetbets-redd...

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

#135

Post by AtheistOfFail »

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?

Fines... Which won't matter if the company's bankrupt

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

#136

Post by bluGill »

bedhead wrote: post #84
djeiasbsbo wrote: post #67

Earlier quoted context omitted.

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…

How much does Melvin have? Margin calls are about total value vs short value. If gme was only a small percentage of their shorts at the start they could be well under the 50% capital requirements to not get a margin call. Hedge funds often don't diversify, but they still know the value in it.

Though I tend to agree with those who conclude that they wouldn't risk lieing in their public statements.

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

#137

Post by mmahemoff »

kasey_junk wrote: post #116

Just for context Melvin has returned better than 30% returns yearly since 2014. There is a very good chance if you are in their fund you’ll look at the total return and be quite happy with the outcome, especially if their risk is decorelated with the other parts of your portfolio.

A rough calculation assuming 35% for 5 years is they made 1.35^5, about ~4.5x. Now it's ~2.2x since they lost 53%.

The good news is you didn't get wiped out, but it's about what a "boring" S&P 500 index would have earned since 2014, and would be worse than the index if you had invested after 2014.

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

#138

Post by briefcomment »

tomp wrote: post #117
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…

I explained my understanding of Citadel and market-making here: https://news.ycombinator.com/item?id=25942593

Sounds like RH is required to ensure the Best Price for customers, but they were fined last month by the SEC for not doing that.

https://www.sec.gov/news/press-release/2020-321

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

#140

Post by gruez »

hn_throwaway_99 wrote: post #53
oraphalous wrote: post #45

Earlier quoted context omitted.

Yeah - I mean, why wouldn't it attract a bunch more shorts that open their positions at the current highs? Wouldn't surprise me if Melvin hasn't really closed their position - but it wouldn't be irrational to think that /r/wallstreetbets will at SOME point in the future move on from gamestop to something else.

> why wouldn't it attract a bunch more shorts that open their positions at the current highs? The cost to borrow shares for GME is currently astronomical, last I saw was like 50%

...APY, which isn't that bad if you think this meme will blow over in a few weeks.
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