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Hedge Fund Chief Defends His Firm’s Bet Against GameStop

At a House Financial Services Committee hearing, Gabriel Plotkin, founder and CEO of hedge fund Melvin Capital, defended his firm’s long-term strategy in a bet that GameStop shares would fall.

Contrary to many reports, Melvin Capital was not rescued in the midst of these events. Citadel has proactively reached out to be a new investor, similar to the investments others have made in our fund. For Citadel, it was an opportunity to buy low and earn returns for its investors when the value of our fund rises and rises. Of course Melvin was going through a tough time, but we always had margin access and we didn’t want a cash infusion. And certainly none of Melvin’s open positions are part of an effort to artificially lower or drive the stock price down. Nothing about our open position prevents a company from achieving its goals. Just Melvin’s opinion on whether it will happen or not. Exclusively to GameStop, we had a research-backed view long before recent events. In fact, we’ve been understaffed at GameStop since Melvin’s founding six years ago because we believe and still believe that the business model of selling new and used video games in physical stores has been overtaken by digital downloads over the internet. And this trend has only accelerated in 2020 as people download video games at home due to the pandemic. As a result, the gaming industry had its best year ever, but GameStop suffered significant losses. In January 2021, a group on Reddit started posting about Melvin’s private investments. They took the information contained in our SEC filings and encouraged others to trade in the opposite direction. Many of these posts were filled with anti-Semitic slurs directed at me and others. Ordinary investors who were convinced to buy GameStop for $100, $200 or even $483 in a delusional frenzy have now lost a significant amount. As this frenzy began, Melvin began to close his position at GameStop at a loss, not because our investment thesis had changed, but because it was unprecedented. We’ve also cut many other Melvin positions that were the subject of similar posts with significant losses both long and short.

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At a House Financial Services Committee hearing, Gabriel Plotkin, founder and CEO of hedge fund Melvin Capital, defended his firm’s long-term strategy in a bet that GameStop shares would fall.CreditCredit…Financial Services Committee

Hedge fund Citadel pumped billions of dollars into Melvin Capital after that fund’s bet went bad against GameStop and inflicted huge losses. Now, Citadel is getting some of its money back.

Citadel notified Melvin of its plans to recover $500 million of the $2 billion it had injected in late January, according to two people who were not authorized to speak publicly on the matter. People said that according to Citadel’s terms of investment, the money will be returned at the end of September as the third quarter draws to a close.

castle plan first reported by the Wall Street Journal.

The cash infusion came in late January as Melvin grappled with a big comeback on his short GameStop bet. Shares of GameStop have flattened in recent years as it tries to transform itself from a true video game retailer to a more modern e-commerce company. But the company’s shares skyrocketed in January after new executives from Chewy.com, which sells pet products, were named and small investors piled into the stock. Instigated by the WallStreetBets forum on Reddit.

Melvin took heavy losses as he tried to recoup the costs of his wrongful trade. Several other short positions were also hurting him, including his bet against motion picture company AMC Entertainment.

CastleHeadquartered in Chicago, Stamford, Conn., where Gabriel Plotkin, founder of Point72 Asset Management – Melvin, once worked. a fund based Started with $2.75 billion According to one of the people briefed on his performance, the injections helped stabilize Melvin, who has posted double-digit percentage returns since February 1.

Melvin is still down 41 percent for this year through July, according to an investor letter reviewed by The New York Times. Due to heavy losses in January.

The two people said that as part of their investment, Citadel receives a share of Melvin’s income, in addition to the return on his money. These people added that Citadel was given the right to withdraw at least some of its cash as early as the third quarter of this year – it is currently exercising that right. (Hedge fund investors generally need to keep their capital invested for a longer period of time.) Citadel itself, which manages $38 billion in assets, rose nearly 9 percent through mid-August, according to one of the people briefed on it. firm’s returns.

Mr Plotkin declined to comment. Citadel founder Kenneth C. Griffin did not respond to requests for comment.

Point72 remains in place.

“I have the same deal as Ken and I don’t have a repayment plan,” said Steven Cohen, Point72’s CEO.

Many states have their own Covid tracking apps to notify local residents.
Credit…Google; COVID Alert NY

some people head back to the office or class After more than 18 months of pandemic disruption, maintaining social distancing remains a concern, particularly with highly contagious diseases. Delta variant spreading across the country. Tech Tip columnist JD Biersdorfer of The New York Times has a few simple suggestions If you’re going back to the office or school, it’s for using your smartphone to help you stay informed and safe.

Be informed: Regular checks of school, municipal and state websites can keep you up to date on mask requirements, vaccination requirements, quarantines and other Covid related news.

Carry your card: Some institutions, venues and employers now vaccination requirementand many New York businesses require proof and will implement it next month. Your paper vaccination card serves as proof, but you can keep it safe at home and digitize it.

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Refuel: When a car window isn’t an option to remotely pick up your breakfast or lunch, there are other ways to minimize your exposure, such as ordering pickup at your local restaurant or bodega.

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