Hedge fund giants Steve Cohen and Ken Griffin join forces to rescue a fellow trader whose positions in runaway actions like GameStop have been secured.
Griffin’s Citadel and Cohen’s Point72 Asset Management are investing $ 2.75 million combined in Melvin Capital Management, which has seen its recent stock bets dwindle by a small army of investors with enriched dreams.
The fund, led by former Cohen lieutenant Gabe Plotkin, has fallen 30 percent, the Wall Street Journal reported.
The bailout comes as retail investors swarm on online forums, such as Reddit’s “wallstreetbets,” to push each other to invest in cheap stocks with short positions against them, through commission-free trading sites like Robinhood.
GameStop, against which Plotkin has bet, had a short interest rate of 102 percent of its outstanding shares on Friday, making it a prime target for sending higher value through what is known as a short squeeze.
Shares of GameStop rose about 178 percent between Thursday’s close and the first Monday in trading as investors tried to cut short-term sellers like Plotkin and Andrew Left, who complained last week about be threatened by their predictions that actions would fall.
“It was short in a market that no longer allows people to fall short,” one hedgie complained. “Today you take a position after getting the job done, then some Reddit guys use their phones to buy penny stocks and end up with their face ripped off. It’s good.”
“I’ve known Gabe Plotkin since 2006 and he’s an exceptional investor and leader,” said Cohen, who will add $ 750 million to his existing investment in the fund. “We are delighted to have the opportunity to invest additional capital and take a portion of the revenue that is not controlled by Melvin Capital.”
Melvin Capital posted a 47% gain in 2019 after losing money in 2018. About a third of Point72’s 2019 performance comes from its stake in Melvin at $ 1 billion.
Griffin and Cohen have openly competed for the talent trade in the past, with Griffin even hiring – and then firing – Cohen’s brother-in-law at the Citadel.
But Plotkin – and hopes to recover from the chaos – seems to have united the two men.
“Gabe Plotkin and the team have given exceptional results throughout Melvin’s history,” Griffin said in a statement to The Post after confirming that Citadel and its partners will contribute $ 2 billion to Melvin’s books. “We have great confidence in Gabe and his team.”
“If Ken Griffin is giving $ 2 billion to Gabe Plotkin, he won’t do it for being a good guy,” said another hedge fund manager. “He clearly thinks Plotkin will recover.”