White Square Capital, run by former Paulson & Co trader Florian Kronawitter, told investors that it would shut its main fund and return capital this month after a review of its business…. White Square, which at its peak managed about $440m in assets, had bet against GameStop, say people familiar with its positioning, and suffered double-digit per cent losses in January.
And, unlike Melvin Capital, had apparently made up for it to some extent.
The fund quickly rebounded in the wake of January’s turmoil and made back “a fair share” of the losses….
So why's White Square calling it a day? Though claims of this sort normally elicit skepticism in these pages, reports that its demise have nothing to do with l’affaire GameStop ring true. While the apparent irrelevance of what used to be called fundamentals to stock prices have led to some serious soul-searching, Kronawitter & co. are suffering from a different existential crisis.
“The decision to close down is related to thinking the equity long-short model is challenged,” said Kronawitter….
White Square said that last year, despite that year’s strong performance, two large investors had opted to withdraw their cash and put it in cheap passive funds or private equity. “We experienced first-hand the shift in trend away from hedge fund investing to cheaper alternatives,” it added…. “The arbitrage opportunities have diminished with both the onslaught of capital caused by central bank monetary interventions, as well as much improved dissemination of information, bringing up the question to what degree the same fees can be justified,” it said.
Speaking of things that probably can’t be justified….
GameStop shares climbed after the video game retailer said it sold 5 million additional shares, raising $1.13 billion in capital to accelerate growth.
The original Reddit-favorite meme stock jumped as much as 12.7% Tuesday after the company announced the completion of its at-the-market equity offering program that was initially disclosed on June 9…. Investors have been encouraged by the moves and looked past the dilution of their stakes as GameStop took advantage of its monstrous rally this year — more than 1,000% — to speed up its e-commerce transformation.