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> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. The firm moved to reduce risk in its investments following a t

> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. The firm moved to reduce risk in its investments following a turbulent start to January when it lost 30 percent in the first three weeks. Melvin’s leverage ratio is at the lowest it has been since the firm’s founding in 2014, said a source familiar with the firm. The news of Melvin’s January performance was first reported by The Wall Street Journal. Which begs the questions: who are the remaining short-sellers and what do their positions look like? Are they other hedge funds with soon-to-expire positions or are they retail investors betting that GME will be back down to $100 or less by next month?

superzamp 6y ago
As many have noticed, from a game theory point of view, Melvin announcing they closed their position is a strictly dominant strategy.
Moodles 6y ago
A better question is: If Melvin made a huge short position and is now finally out of it, why would they bother telling everyone? ;-)
- MichaelApproved 6y ago
  So investors in Melvin won’t abandon them. They want to reassure their own investors that the damage is done and they’re out.
  - joekrill 6y ago
    In that case they could most definitely inform their investors directly and there's absolutely no need to make a public statement about it.
    - flunhat 6y ago
      They could, but it's common (and not suspicious) for an investor involved in a public fracas to publicly reveal they've exited their position. Bill Ackman did something similar with Herbalife: https://www.investopedia.com/news/billionaire-bill-ackman-dumps-herbalife-ending-5year-war-betting-against-it/ https://www.investopedia.com/news/billionaire-bill-ackman-du...
- saurik 6y ago
  Maybe so investors can evaluate the current status of their hedge fund without thinking there is some massive looming instability about to hit them?
  - Moodles 6y ago
    Or, maybe they're lying to discourage more calls? In any case, their best strategy is to claim they're out of the short position so really them saying so is useless information.
    - deleted 6y ago
      [deleted]
    - fractionalhare 6y ago
      What's not useless information is that they simply didn't have the AUM to survive GME going from $100 to $300. They either got out when they said they did, or they're gone.
    - tzs 6y ago
      > Or, maybe they're lying to discourage more calls? Is this something they are legally allowed to lie about? If it is not, is this the sort of thing they can lie about anyway because unless an insider blabs no one would know, or is it one of those things that someone would be able to figure out from required SEC filing or other public records?
      - infinite8s 6y ago
        Shorts are not required to be disclosed on their 13-F filings (which they must file quarterly to report long positions).
    - gonzo41 6y ago
      I know it's not illegal, but how is being that big and lying, not market manipulation?
      - 6y ago
- deleted 6y ago
  [deleted]
Judgmentality 6y ago
The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions. I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock. Considering this is a hedge fund, I just assume they're lying because, you know, it's a fucking hedge fund. EDIT: People are claiming CNBC bought ads, not Melvin Capital. https://i.redd.it/8vxraurkcce61.png https://i.redd.it/8vxraurkcce61.png
- ajross 6y ago
  > You don't spend money on ads saying "we no longer have a financial stake in this stock" I don't think they did. The source of this meme seems to be a Twitter ad from CNBC that was teasing an interview with a quote to that effect. That's a CNBC ad selling their show, they don't take paid ads from their guests.
  - Teever 6y ago
    > they don't take paid ads from their guests. How do you know this?
    - ajross 6y ago
      They sell journalism under the NBC brand. Is this a serious question? If CNBC was issuing paid advertisement like that it would be a much, much bigger story than a spike in a small cap retail stock.
      - elif 6y ago
        NBC has double the primetime product placement of it's next nearest competitor, fox. https://ufdc.ufl.edu/UF00101603/00001 https://ufdc.ufl.edu/UF00101603/00001
        ajross 6y ago
newacct583 6y ago
The stock is currently around $300, up by a factor of five from last week and much more than that over its historical base. The question should be who isn't shorting GME, not leading questions about a conspiracy theory as to whether or not Melvin actually closed its shorts or not. I mean, I haven't shorted GME personally. But I've absolutely joked with friends that it's an obvious play. Maybe I should.
- MichaelApproved 6y ago
  If you can find shares to borrow, are willing to pay the 30% fee, and can handle the swings of a spike higher, go for it. What will last longer, your solvency or the market’s irrationality?
  - gruez 6y ago
    >[...] are willing to pay the 30% fee [...] that's per year. If it goes down 30% half a year from now you'll still be ahead.
- Tenoke 6y ago
  Shorts aren't free. Even if you know a stock will eventually drop, benefiting from that is not quite so simple.
  - whateveracct 6y ago
    even in an obviously stupid situation like GME, timing the market is still timing the market.
- deleted 6y ago
  [deleted]
- icedchai 6y ago
  It seems less risky to buy puts, not short directly. I wouldn’t want to be short if this goes up another 10x, even briefly. It will go back down but you might get wiped out first.
Tenoke 6y ago
Likely just new shorts from a variety of places. I've seen plenty of people opening shorts with the expectations that WSB's play will blow in their face eventually.
- oraphalous 6y ago
  Yeah - I mean, why wouldn't it attract a bunch more shorts that open their positions at the current highs? Wouldn't surprise me if Melvin hasn't really closed their position - but it wouldn't be irrational to think that /r/wallstreetbets will at SOME point in the future move on from gamestop to something else.
  - hn_throwaway_99 6y ago
    > why wouldn't it attract a bunch more shorts that open their positions at the current highs? The cost to borrow shares for GME is currently astronomical, last I saw was like 50%
    - gruez 6y ago
      ...APY, which isn't that bad if you think this meme will blow over in a few weeks.
      - imtringued 6y ago
        The problem is that hedgefunds call retail traders stupid and if they are really that stupid then they will hold the bags, which is exactly what the shorts don't want.
tedunangst 6y ago
Have you looked at open interest for puts? How do you think that's hedged?
hntrader 6y ago
How up-to-date is that short interest data?
Aunche 6y ago
My theory is that Melvin sold their short positions to other hedge funds that have enough liquidity to weather the memestorm. Melvin itself is likely just trying to keep their other assets, so they can't afford the shorts. Now that the stock is obviously overvalued, the borrowing fee for GME is insanely high. Buying the shorts from Melvin would be an arbitrage opportunity.
deleted 6y ago
[deleted]

superzamp 6y ago

As many have noticed, from a game theory point of view, Melvin announcing they closed their position is a strictly dominant strategy.

Moodles 6y ago

A better question is: If Melvin made a huge short position and is now finally out of it, why would they bother telling everyone? ;-)

MichaelApproved 6y ago
So investors in Melvin won’t abandon them. They want to reassure their own investors that the damage is done and they’re out.
- joekrill 6y ago
  In that case they could most definitely inform their investors directly and there's absolutely no need to make a public statement about it.
  - flunhat 6y ago
    They could, but it's common (and not suspicious) for an investor involved in a public fracas to publicly reveal they've exited their position. Bill Ackman did something similar with Herbalife: https://www.investopedia.com/news/billionaire-bill-ackman-dumps-herbalife-ending-5year-war-betting-against-it/ https://www.investopedia.com/news/billionaire-bill-ackman-du...
saurik 6y ago
Maybe so investors can evaluate the current status of their hedge fund without thinking there is some massive looming instability about to hit them?
- Moodles 6y ago
  Or, maybe they're lying to discourage more calls? In any case, their best strategy is to claim they're out of the short position so really them saying so is useless information.
  - deleted 6y ago
    [deleted]
  - fractionalhare 6y ago
    What's not useless information is that they simply didn't have the AUM to survive GME going from $100 to $300. They either got out when they said they did, or they're gone.
  - tzs 6y ago
    > Or, maybe they're lying to discourage more calls? Is this something they are legally allowed to lie about? If it is not, is this the sort of thing they can lie about anyway because unless an insider blabs no one would know, or is it one of those things that someone would be able to figure out from required SEC filing or other public records?
    - infinite8s 6y ago
      Shorts are not required to be disclosed on their 13-F filings (which they must file quarterly to report long positions).
  - gonzo41 6y ago
    I know it's not illegal, but how is being that big and lying, not market manipulation?
    - 6y ago
deleted 6y ago
[deleted]

Judgmentality 6y ago

The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions. I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock. Considering this is a hedge fund, I just assume they're lying because, you know, it's a fucking hedge fund. EDIT: People are claiming CNBC bought ads, not Melvin Capital. https://i.redd.it/8vxraurkcce61.png https://i.redd.it/8vxraurkcce61.png

ajross 6y ago
> You don't spend money on ads saying "we no longer have a financial stake in this stock" I don't think they did. The source of this meme seems to be a Twitter ad from CNBC that was teasing an interview with a quote to that effect. That's a CNBC ad selling their show, they don't take paid ads from their guests.
- Teever 6y ago
  > they don't take paid ads from their guests. How do you know this?
  - ajross 6y ago
    They sell journalism under the NBC brand. Is this a serious question? If CNBC was issuing paid advertisement like that it would be a much, much bigger story than a spike in a small cap retail stock.
    - elif 6y ago
      NBC has double the primetime product placement of it's next nearest competitor, fox. https://ufdc.ufl.edu/UF00101603/00001 https://ufdc.ufl.edu/UF00101603/00001
      - ajross 6y ago

newacct583 6y ago

The stock is currently around $300, up by a factor of five from last week and much more than that over its historical base. The question should be who isn't shorting GME, not leading questions about a conspiracy theory as to whether or not Melvin actually closed its shorts or not. I mean, I haven't shorted GME personally. But I've absolutely joked with friends that it's an obvious play. Maybe I should.

MichaelApproved 6y ago
If you can find shares to borrow, are willing to pay the 30% fee, and can handle the swings of a spike higher, go for it. What will last longer, your solvency or the market’s irrationality?
- gruez 6y ago
  >[...] are willing to pay the 30% fee [...] that's per year. If it goes down 30% half a year from now you'll still be ahead.
Tenoke 6y ago
Shorts aren't free. Even if you know a stock will eventually drop, benefiting from that is not quite so simple.
- whateveracct 6y ago
  even in an obviously stupid situation like GME, timing the market is still timing the market.
deleted 6y ago
[deleted]
icedchai 6y ago
It seems less risky to buy puts, not short directly. I wouldn’t want to be short if this goes up another 10x, even briefly. It will go back down but you might get wiped out first.

Tenoke 6y ago

Likely just new shorts from a variety of places. I've seen plenty of people opening shorts with the expectations that WSB's play will blow in their face eventually.

oraphalous 6y ago
Yeah - I mean, why wouldn't it attract a bunch more shorts that open their positions at the current highs? Wouldn't surprise me if Melvin hasn't really closed their position - but it wouldn't be irrational to think that /r/wallstreetbets will at SOME point in the future move on from gamestop to something else.
- hn_throwaway_99 6y ago
  > why wouldn't it attract a bunch more shorts that open their positions at the current highs? The cost to borrow shares for GME is currently astronomical, last I saw was like 50%
  - gruez 6y ago
    ...APY, which isn't that bad if you think this meme will blow over in a few weeks.
    - imtringued 6y ago
      The problem is that hedgefunds call retail traders stupid and if they are really that stupid then they will hold the bags, which is exactly what the shorts don't want.

tedunangst 6y ago

Have you looked at open interest for puts? How do you think that's hedged?

hntrader 6y ago

How up-to-date is that short interest data?

Aunche 6y ago

My theory is that Melvin sold their short positions to other hedge funds that have enough liquidity to weather the memestorm. Melvin itself is likely just trying to keep their other assets, so they can't afford the shorts. Now that the stock is obviously overvalued, the borrowing fee for GME is insanely high. Buying the shorts from Melvin would be an arbitrage opportunity.

deleted 6y ago

[deleted]