Melvin Capital Closes After Significant Loss of Meme Shares, Market Stagnation

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Once one of Wall Street’s most successful hedge funds, Melvin Capital, which lost billions of dollars in meme stock saga, will be closed after a renewed market downturn this year.

Gabe Plotkin has been widely regarded as one of the best traders in the industry after years of posting double-digit returns, and investors have told investors that the last 17 months have been a “time of incredible trials”. Told.

Plotkin was trying to turn the company around after being kicked out by betting on retailer’s favorite GameStop in early 2021 and after being stepped back by this year’s market fall.

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“The appropriate next step is to liquidate the fund by completely liquidating the fund’s assets and accounts and returning cash to all investors,” Protokin wrote in a letter reviewed by Reuters Wednesday. rice field.

Melvin Capital’s assets at the end of April were $ 7.8 billion. The fund lost 23% in the first four months of 2022, according to people familiar with the fund’s finances.

This year’s losses follow the sharp loss in 2021, when Melvin Capital ended the year with a 39% decline. The company bet that GameStop’s stock would fall, but was hit when private investors took the other side and soared the stock.

The company had $ 12.5 billion in assets at the beginning of 2021.

In the letter, Protokin said he had already raised a significant amount of cash and reduced its exposure to funds.

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A Plotkin spokesman declined to comment.

For some time, strong investors continued to support Melvin with Citadel LLC and Point72 Asset Management, where Plotkin used to work, investing billions of dollars in emergency cash in early 2021 in the midst of memetic stock losses.

Earlier this year, Protokin told investors he wanted to reorganize his assets to shrink from about $ 8.7 billion to $ 5 billion and temporarily charge lower rates. Investors responded strongly to the proposal, and Protokin was soon forced to apologize for making a mistake.

On Wednesday, Protokin said he would begin the portfolio liquidation process and stop claiming management fees from June 1. .. “

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At the end of the first quarter, Melvin’s biggest investments included bets on Live Nation Entertainment, Hilton Worldwide Holdings, Amazon and Datadog. Their stock prices have fallen sharply in recent weeks, and speculation is circulating that hedge funds may be trying to close their positions.

Plotkin, formerly a star investor in Stephen A. Cohen’s hedge fund, formerly known as SAC Capital Advisors, launched his company in 2014 after SAC pleaded guilty to insider trading. I left for. Melvin Capital quickly gained attention, gained strong investors and ended with a profit of 52.5% in 2020, when the pandemic began.

From 2014 to 2020, Melvin boasted an average annual revenue of 30%. From its inception to the present, the fund has returned an average of 11.9% annually. (Report by Svea Herbst-Bayliss and additional report by Mehnaz Yasmin in Bangalore, edited by Amy Caren Daniel and Richard Pullin)