For a brief moment, it looked like order was being restored. Things had, of course, gotten almost inconceivably worse this morning, which given how bad things got yesterday is really saying something. But there it was: Elon Musk tweeted, and GameStop shares, already up more than $100 on Tuesday, jumped another $200 within a half-hour of the opening bell. Appetites were already being lost. And then:
With GameStop Corp. falling as much as 68%, the most-shorted shares lost 9% in its sharpest drop since March, paring gains this month to 39%, a Goldman Sachs Group Inc. basket shows. Meanwhile, an exchange-traded fund tracking hedge funds’ favorite names (GVIP) jumped 4%.... Thursday’s reversal still looks minor relative to this week’s seismic moves spurred by day traders besieging the popular positions of the smart money. But the shift in trading fortune may signal a peak in deleveraging pressures on the institutional crowd….
“Those worries in relation to hedge funds have faded,” wrote David Madden, an analyst at CMC Markets, in a note. Restrictions on trading apps have “helped bring down the fear factor as the battle won’t be as intense now,” he added.
Which is a strange way of predicting that GME would almost immediately soar $150 by lunchtime, but they did close the day below $200, with that big assist from Robinhood, et. al. Still, the damage was definitely done, and there’s carnage to be counted. So let’s do that.
Morgan Stanley said in a note to clients that Monday and Tuesday were among the top five heaviest days for so-called de-grossing over the past decade. Funds have not only been covering their short positions — the bets they placed against individual shares — but also selling shares in companies to cut their leverage and reduce their gross exposure to the market.
Goldman Sachs said Monday saw the largest unwinding in equities by hedge funds since August 2019.
Viking Global Investors, Andreas Halvorsen’s $44 billion firm, is down about 7% so far this year in its hedge fund, according to a person familiar with the matter.
Cohen’s Point72 Asset Management declined 10% to 15% so far this month, while Sundheim’s D1 Capital Partners, one of last year’s top-performing funds, is down about 20%. Melvin Capital, Plotkin’s firm, had lost 30% through Friday…. Jack Woodruff’s $2.8 billion Candlestick Capital has fallen 10 to 15% in January on its short wagers, while the $3.5 billion Maplelane Capital lost about 33% through Tuesday in part because of a short position on GameStop, according to investors. By end of day Wednesday, Maplelane was down 45%.
“Explain to me like I’m 5 with what’s going on with GameStop/amc and how will this affect the Mets,” a Twitter user named @Metsochist4Life wrote.
A user named @AreolaBorealis wrote directly to Cohen saying: “Is this Gamestop business [affecting] the Mets payroll? I mean that’s the main story in all of this.”
Cohen replied: “Why would one have anything to do with the other?”
Earlier Cohen — who’s gone from being the billionaire behind the curtain to interacting with people on Twitter — suggested that he’s been getting it from all sides in the wake of his Melvin investment.
“Rough crowd on Twitter tonight. Hey stock jockeys keep bringing it,” he wrote.
“PRISON TIME,” [Barstool Sports founder Dave] Portnoy said in a tweet that linked to Cohen, founder of Point72 Capital, as well as Citadel, a hedge fund run by billionaire Ken Griffin./“Dems and Republicans haven’t agreed on 1 issue till this. That’s how blatant, illegal, unfathomable today’s events are. It also shows how untouchable @RobinhoodApp @StevenACohen2C Citadel Point72 all think they are. Fines aren’t enough. Prison or bust.”
Cohen snapped back: “Hey Dave , What’s your beef with me. I’m just trying to make a living just like you.Happy to take this offline.”
“I don’t do offline. That’s where shady s*** happens,” Portnoy said.
He then accused Cohen of having a hand in controversial restrictions on trading apps like Robinhood that are hurting novice investors behind the spectacular rally in small stocks like Gamestop…. “I think you had strong hand in todays criminal events to save hedge funds at the cost of ordinary people. Do you unequivocally deny that?,” Portnoy said….
Cohen defended himself saying, “What are you talking about? I unequivocally deny that accusation. I had zero to do with what happened today…chile out.”
Portnoy continued: “Then in your professional option why was trading halted on $amc $gme $nok $sndl $nakd ? I’d be very curious?”
“Good question,” Cohen shot back. “Those questions should be directed at Robin Hood etc. I’m a trader just like your like you are . When you find out give me a holler.”
(And don’t worry, Mets fans: Thornton says everything’s going to be just fine.)
Sources tell The Post that most of Cohen’s pain is coming from his investment in Melvin Capital, a fund run by his former protege Gabe Plotkin, which became the first high-profile victim of the social media-fueled market revolt against hedge funds who make billions by shorting stocks…. “If he’s bailing out Plotkin I’m not too concerned for him,” a fellow hedge fund manager said of Cohen. “Plotkin didn’t have adequate risk management for something he couldn’t have seen coming and Steve got hit by a guy who made him billions two years ago. It sucks but he’ll get over it.”
Plus, he’s got too much studying to do.
In the past few days numerous institutions and large hedge funds have been in touch asking for additional real-time data about discussions happening on Reddit forums, said James Kardatzke, Quiver chief executive and co-founder…. The head of one of the world’s biggest hedge fund firms told the Financial Times it was planning to start using natural language processing to scour forums such as Reddit to avoid being caught in pile-ons against negative bets. “Reddit is definitely a risk management issue. It’s at the top of our agenda,” the person said.
“The reason the market is doing what it’s doing is, people are sitting at home, getting their checks from the government, basically trading for no commissions and no interest rates. I’m not saying they’re stupid. Show me a guy with a good record consistently, and I’ll show you a smart guy….”
“I hate that expression with a passion,” said Cooperman, who has said he voted for Biden in the November election despite disagreeing with him over certain economic issues, such as taxes…. “I’m willing to work six months a year for the government and six months for myself, which means a marginal tax rate of 50%,” said Cooperman…. “This fair share is a bullshit concept. It’s just a way of attacking wealthy people, and I think it’s inappropriate,” Cooperman said Thursday. “We’ve all got to work together and pull together.”
Hedge funds retreat in face of day-trader onslaught [FT]
Hedge Funds Slashing Equity Exposure at Fastest Pace Since 2014 [Bloomberg]
Hedge-Fund Titans Lose Billions to Reddit Traders Running Amok [Bloomberg]
Hedge Fund Maplelane Loses About 33% on Short Bets This Month [Bloomberg Quint]
Viking Hedge Fund Down About 7% in Stock Market Tumult [Bloomberg]
Hedge Funds’ Trades Are Working Again After Worst Day in History [Bloomberg]
Mets fans worried over Steve Cohen’s GameStop involvement [N.Y. Post]
Mets owner Steve Cohen can’t escape GameStop stock fallout amid Reddit revolt [Thornton/N.Y. Post]
Steve Cohen and Dave Portnoy feud over GameStop on Twitter [Thornton/N.Y. Post]
Hedge funds rush to get to grips with retail message boards [FT]
Leon Cooperman on GameStop Reddit speculators: ‘I’m not damning them’ but it will ‘end in tears’ [CNBC]