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> Melvin doesn't have a short position anymore. Source? If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to preve

> Melvin doesn't have a short position anymore. Source? If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to prevent the price from going any higher.

deleted 6y ago
[deleted]
raducu 6y ago
Citadel din't bail them out and they didn't close the positions, if they did, the "bailout" would be a complete writeoff -- why would Citadel do that? Citadel probably gave them the cash to avoid a margin call, knowing they can later manipulate the market and the shorts would payoff in the end, and Citadel would get their share of the spoils. Otherwise a bailout makes no economical sense, Citadel is not the FED, they can't print money just to cover someone elses losses.
- JumpCrisscross 6y ago
  > if they did, the "bailout" would be a complete writeoff What? No it wouldn't. Melvin faced cash calls. To raise cash fast they could (a) get it from their LPs (fat chance), (b) raise it from someone else or (c) sell other assets. The last option is a fire sale. You figure out what the fire sale discount would be, say it's 50%, and then use that to get (b). I don't know what the terms of the bailout were. If I were structuring, I'd make it a loan with a super-high interest rate triply collateralized by their remaining assets. If they pay it back, I get the super high interest rate. If they default, I get the rest of their assets for 33¢ on the dollar. Between those two, the latter is frankly the higher-payoff scenario. (I would also require all short positions be closed out within N days, with the borrower's investors bearing the losses.)
  - raducu 6y ago
    Are you saying that Citadel just lent someone money to close short positions worth a very significant percentage of their total assets? (Melvin having 11 bilion in total assets and Citadel giving them 3 billion). That's what I was pointing out! Melvin did not close their shorts(as they said they did), they just got more rope from Citadel, and Citadel was willing to do just that knowing they can manipulate the market. The narative of Melvin was "Citadel gave us 3 billion dollars, we closed our shorts at a loss, you won wsb, aren't you happy, you won, now leave us alone and stop buying".
    - JumpCrisscross 6y ago
      > Citadel just lent someone money to close short positions worth a very significant percentage of their total assets? Yes. Those other assets are presumably uncorrelated to this short position. If they were fire sold, depending on the assets, they could have gotten 20¢ or 30¢ on the dollar. That discount gives Melvin the incentive to borrow, even at exorbitant rates. It protects the rest of the portfolio. With the bailout, the GameStop loss is capped and eaten by LPs. That sucks. But it sucks less than eating that loss and selling off the rest of the portfolio for peanuts. > Melvin did not close their shorts(as they said they did) You're alleging securities fraud. This may be the case! But we have zero evidence of it. And if Citadel and Point72 invested $3bn to aid and abet securities fraud, that would be quite stupid.
      - PicassoCTs 6y ago
        They got away with worse in 2008?
        fractionalhare 6y ago
        No "they" didn't. Wall Street is not a homogenous thing. You're thinking of banks in particular, which are about as different from hedge funds categorically as Facebook and Salesforce. Sure they're both tech companies with software products, but they have entirely different business models.
        jachee 6y ago
        I believe GP was specifically referring to Citadel, nee SAC: https://popular.info/p/the-merry-adventures-of-robinhood https://popular.info/p/the-merry-adventures-of-robinhood
        kgwgk 6y ago
        You may be confusing SAC / Point72 with Citadel.
  - raducu 6y ago
    Genuinely curios, what type of assets can only be liquidated 33 cents on the dollar? And what is the likelyhood Melvin had such a significant proportion of their portfolio in such assets?
    - ethbr0 6y ago
      The type of assets that you need to sell in the next hour, of such a magnitude that there are only a few buyers.
    - sandworm101 6y ago
      Junk bonds. Packages containing failed/failing mortgages. Unsecured medical debt.
      - georgeecollins 6y ago
        Good grief, can you imagine trying to sleep at night with a portfolio of unsecured medical debt? "Pay me for your cancer treatment!"
        sandworm101 6y ago
        If you want to feel good, buy it for pennies and then forgive it. 100$ to you can be several thousand to someone owing the debt.
        hanklazard 6y ago
        You can do exactly this through: https://ripmedicaldebt.org https://ripmedicaldebt.org
        bozhark 6y ago
        This would be a good NFP strategy until US gets universal healthcare @hanklazard best me to it
        birktj 6y ago
        Could you in theory buy your own debt?
- ric2b 6y ago
  Think about it, you're staring at a mob of people willing to buy the stock at absurd prices... Why would you announce that you've closed your shorts instead of keeping quiet and profiting of the mob? The answer is they didn't close it, they were trying to get the mob to back off. And no, it technically wouldn't be fraud, they were very careful with their words...
JumpCrisscross 6y ago
> If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to prevent the price from going any higher That would be securities fraud.
- metiscus 6y ago
  If the penalty is less than the potential fine as has sometimes been the case, is that really that big of a deterrent?
  - scsilver 6y ago
    Seems like the most financially responsible move. And these guys are fiduciaries.
- Fredej 6y ago
  Aren't we already discussing SEC violations here?
  - monkpit 6y ago
    Yeah, I don’t see how it being fraud leads to the conclusion that it’s not happening.
- ordinaryradical 6y ago
  If the alternative is bankruptcy and the destruction of your legacy, would you risk it?
- ZephyrBlu 6y ago
  How have they exited their short position when the short interest is still ~130% though?
  - JumpCrisscross 6y ago
    > How have they exited their short position when the short interest is still ~130% though? Lots of people are short? I know at least half a dozen people who bought puts over the last few days. Those puts hedge into shorting the same way calls turn into buying.
anonymouse008 6y ago
Here's the source -- Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management - WSJ [0] Read As: Melvin no longer has a short position. Citadel (edit: or like someone else said, a 3rd party) does. Citadel will handle this. Melvin is in time out. We'll figure out who holds the chips in a few weeks time when filing deadlines are due. Thus it's dark. Thus explains the perfectly executed short ladder today - could only be pulled off by someone with more dry powder than Melvin - but if you look at the Level II data, this is going to take a long, long time. [0]https://www.wsj.com/articles/citadel-point72-to-invest-2-75-billion-into-melvin-capital-management-11611604340 https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...
- JumpCrisscross 6y ago
  > the perfectly executed short ladder today I missed this. What's this referencing?
  - dspig 6y ago
    Selling back and forth at a lower and lower price while WSB couldn’t buy to keep the price up
    - stainforth 6y ago
      > while WSB couldn’t buy to keep the price up Yes which could be called the crime of these brokers
  - deleted 6y ago
    [deleted]
jb775 6y ago
Yeah I don't believe it. Or they transferred it to a complicit 3rd party who will eventually benefit.
deleted 6y ago
[deleted]
piracy1 6y ago
Weather or not Melvin has the position, you can look at the borrow rates and short interest. Someone is balls deep in shorts and they have to cover one of these days.

> Melvin doesn't have a short position anymore. Source? If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to prevent the price from going any higher.

deleted 6y ago

[deleted]

raducu 6y ago

Citadel din't bail them out and they didn't close the positions, if they did, the "bailout" would be a complete writeoff -- why would Citadel do that? Citadel probably gave them the cash to avoid a margin call, knowing they can later manipulate the market and the shorts would payoff in the end, and Citadel would get their share of the spoils. Otherwise a bailout makes no economical sense, Citadel is not the FED, they can't print money just to cover someone elses losses.

JumpCrisscross 6y ago
> if they did, the "bailout" would be a complete writeoff What? No it wouldn't. Melvin faced cash calls. To raise cash fast they could (a) get it from their LPs (fat chance), (b) raise it from someone else or (c) sell other assets. The last option is a fire sale. You figure out what the fire sale discount would be, say it's 50%, and then use that to get (b). I don't know what the terms of the bailout were. If I were structuring, I'd make it a loan with a super-high interest rate triply collateralized by their remaining assets. If they pay it back, I get the super high interest rate. If they default, I get the rest of their assets for 33¢ on the dollar. Between those two, the latter is frankly the higher-payoff scenario. (I would also require all short positions be closed out within N days, with the borrower's investors bearing the losses.)
- raducu 6y ago
  Are you saying that Citadel just lent someone money to close short positions worth a very significant percentage of their total assets? (Melvin having 11 bilion in total assets and Citadel giving them 3 billion). That's what I was pointing out! Melvin did not close their shorts(as they said they did), they just got more rope from Citadel, and Citadel was willing to do just that knowing they can manipulate the market. The narative of Melvin was "Citadel gave us 3 billion dollars, we closed our shorts at a loss, you won wsb, aren't you happy, you won, now leave us alone and stop buying".
  - JumpCrisscross 6y ago
    > Citadel just lent someone money to close short positions worth a very significant percentage of their total assets? Yes. Those other assets are presumably uncorrelated to this short position. If they were fire sold, depending on the assets, they could have gotten 20¢ or 30¢ on the dollar. That discount gives Melvin the incentive to borrow, even at exorbitant rates. It protects the rest of the portfolio. With the bailout, the GameStop loss is capped and eaten by LPs. That sucks. But it sucks less than eating that loss and selling off the rest of the portfolio for peanuts. > Melvin did not close their shorts(as they said they did) You're alleging securities fraud. This may be the case! But we have zero evidence of it. And if Citadel and Point72 invested $3bn to aid and abet securities fraud, that would be quite stupid.
    - PicassoCTs 6y ago
      They got away with worse in 2008?
      - fractionalhare 6y ago
        No "they" didn't. Wall Street is not a homogenous thing. You're thinking of banks in particular, which are about as different from hedge funds categorically as Facebook and Salesforce. Sure they're both tech companies with software products, but they have entirely different business models.
        jachee 6y ago
        I believe GP was specifically referring to Citadel, nee SAC: https://popular.info/p/the-merry-adventures-of-robinhood https://popular.info/p/the-merry-adventures-of-robinhood
        kgwgk 6y ago
        You may be confusing SAC / Point72 with Citadel.
- raducu 6y ago
  Genuinely curios, what type of assets can only be liquidated 33 cents on the dollar? And what is the likelyhood Melvin had such a significant proportion of their portfolio in such assets?
  - ethbr0 6y ago
    The type of assets that you need to sell in the next hour, of such a magnitude that there are only a few buyers.
  - sandworm101 6y ago
    Junk bonds. Packages containing failed/failing mortgages. Unsecured medical debt.
    - georgeecollins 6y ago
      Good grief, can you imagine trying to sleep at night with a portfolio of unsecured medical debt? "Pay me for your cancer treatment!"
      - sandworm101 6y ago
        If you want to feel good, buy it for pennies and then forgive it. 100$ to you can be several thousand to someone owing the debt.
        hanklazard 6y ago
        You can do exactly this through: https://ripmedicaldebt.org https://ripmedicaldebt.org
        bozhark 6y ago
        This would be a good NFP strategy until US gets universal healthcare @hanklazard best me to it
        birktj 6y ago
        Could you in theory buy your own debt?
ric2b 6y ago
Think about it, you're staring at a mob of people willing to buy the stock at absurd prices... Why would you announce that you've closed your shorts instead of keeping quiet and profiting of the mob? The answer is they didn't close it, they were trying to get the mob to back off. And no, it technically wouldn't be fraud, they were very careful with their words...

JumpCrisscross 6y ago

> If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to prevent the price from going any higher That would be securities fraud.

metiscus 6y ago
If the penalty is less than the potential fine as has sometimes been the case, is that really that big of a deterrent?
- scsilver 6y ago
  Seems like the most financially responsible move. And these guys are fiduciaries.
Fredej 6y ago
Aren't we already discussing SEC violations here?
- monkpit 6y ago
  Yeah, I don’t see how it being fraud leads to the conclusion that it’s not happening.
ordinaryradical 6y ago
If the alternative is bankruptcy and the destruction of your legacy, would you risk it?
ZephyrBlu 6y ago
How have they exited their short position when the short interest is still ~130% though?
- JumpCrisscross 6y ago
  > How have they exited their short position when the short interest is still ~130% though? Lots of people are short? I know at least half a dozen people who bought puts over the last few days. Those puts hedge into shorting the same way calls turn into buying.

anonymouse008 6y ago

Here's the source -- Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management - WSJ [0] Read As: Melvin no longer has a short position. Citadel (edit: or like someone else said, a 3rd party) does. Citadel will handle this. Melvin is in time out. We'll figure out who holds the chips in a few weeks time when filing deadlines are due. Thus it's dark. Thus explains the perfectly executed short ladder today - could only be pulled off by someone with more dry powder than Melvin - but if you look at the Level II data, this is going to take a long, long time. [0]https://www.wsj.com/articles/citadel-point72-to-invest-2-75-billion-into-melvin-capital-management-11611604340 https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...

JumpCrisscross 6y ago
> the perfectly executed short ladder today I missed this. What's this referencing?
- dspig 6y ago
  Selling back and forth at a lower and lower price while WSB couldn’t buy to keep the price up
  - stainforth 6y ago
    > while WSB couldn’t buy to keep the price up Yes which could be called the crime of these brokers
- deleted 6y ago
  [deleted]

jb775 6y ago

Yeah I don't believe it. Or they transferred it to a complicit 3rd party who will eventually benefit.

deleted 6y ago

[deleted]

piracy1 6y ago

Weather or not Melvin has the position, you can look at the borrow rates and short interest. Someone is balls deep in shorts and they have to cover one of these days.