Melvin Capital, the hedge fund at the center of the GameStop Corporation GME short squeeze saga, will shut down, Reuters reported on Wednesday.
What Happened: Melvin Chief Investment Officer Gabriel Plotkin said in a letter that the last 17 months have been an “incredibly trying time,” according to Reuters.
“The appropriate next step is to wind down the Funds by fully liquidating the Funds' assets and accounts and returning cash to all investors."
Plotkin said Melvin had already raised a significant amount of cash and cut the funds’ exposure.
See Also: How To Buy GameStop (GME) Shares
Why It Matters: Melvin has been hit by the market downturn in 2022. The fund had $7.8 billion in assets in end-April and lost 23% in the first four months of the year, a person familiar with the matter told Reuters.
In 2021, Melvin reaped losses of 39% betting against GameStop, which was propped up by retail investors. At the beginning of 2021, Melvin had assets of $12.5 billion, according to Reuters.
After the GameStop short-selling misfired, Melvin received a $2.75 injection from hedge funds Citadel and Point72 in January 2021. By August that year, Citadel had pulled out nearly $500 million from Melvin Capital.
The events of early 2021, which engulfed Melvin, launched an era of retail interest in stocks of short squeezed companies such as GameStop, AMC Entertainment Holdings Inc AMC, and BlackBerry Ltd BB and brought to fore the concept of meme stocks.
Price Action: On Wednesday, GameStop shares closed 8.9% lower at $91.41 over 24 hours and fell 1% in the after-hours trading, according to data from Benzinga Pro.
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