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The arguments that Melvin lied about closing their position are as follows: 1. Short interest on GME is still high, even after they claimed to have closed thei

The arguments that Melvin lied about closing their position are as follows: 1. Short interest on GME is still high, even after they claimed to have closed their short position. 2. They have a "huge incentive" to lie about this, because people believe it would encourage a selloff. That is the entirety of the evidence. It is uncritical despite the fact that it gets frenetically repeated on reddit. Here is the evidence which suggests they didn't lie: 1. That first argument doesn't prove what people believe it does. First, short interest is only officially reported twice monthly, and most cited data is out of date or estimated. More importantly, short interest is an aggregate measure which does not track specific positions. It only tracks all positions together. Other firms which haven't been burned by the price increase have opened new positions, hoping to short from the top tick (or thereabouts). 2. The second argument is reddit cargo culting "game theory", and it violates both logic and Occam's Razor. If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. Either of those will pierce the veil of your firm and leave your personal assets liable for reclamation by the SEC and/or angry investors. You will be sued. You will lose. Moreover, the "incentive" of this move is that you might prompt a selloff and get to keep your short position. It strains credulity to think someone would make such an uncertain bet with a huge psychological component when their firm is literally on the line. If you're wrong, your firm is dead and all of your personal assets are up for seizure in the ensuing fallout for the aforementioned reasons. The alternative is that you just close the position, don't lie about it, and your firm survives and you just have a bad year. You are personally unscathed as the fund manager. And since you've had historically excellent returns and this was a 3 or 4 sigma event, long term you'll probably be fine. You'll have a new signal to incorporate into your portfolio risk management and you'll move on.

flunhat 6y ago
Thank you 1000x for writing this. I thought I was going insane reading all the comments like “Melvin publicly said they closed their short position, which is suspicious because they said it publicly (if they said nothing, you all would still find it suspicious!), so they are probably lying about closing their short position”
- alasdair_ 6y ago
  Can you provide a source that states Melvin publicly said this? All I can find are references to CNBC where a journalist claims "from what I understand" Melvin is out of the stock. The problem with this is that it's easy for the CEO to later say "the journalist misunderstood" or "I said we covered some of our position (1% is 'some' right?)" or many other things. Is there a definitive statement from Melvin themselves anywhere?
m3kw9 6y ago
Makes sense, but don’t let this spoil the party back at wsb
- Anon1096 6y ago
  You'd just get banned if you write this there.
lc3sim 6y ago
I am not a financial advisor and this is not financial advice. I understand your response. There is one assumption that I think marks the difference between what side of the line one falls on. My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. In exercise, I believe this to be the crux of the speculative argument that Melvin is dumb enough to use psychological warfare (which may have legal ramifications if they get caught) to try to get GME stock back down.
- nrmitchi 6y ago
  > I am not a financial advisor and this is not financial advice. Okay as soon as I read this I knew I shouldn't be expecting much, but... > My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. This really isn't just lying a little bit, and isn't just a large risk. If you're running a fund like this, purposely making materially false statements like this would be akin to jumping out of a plane without a parachute and somehow hoping for the best, while 5M angry redditors are purposely trying to make sure you crash into the hardest thing possible. This position of "well maybe he's lying, you can't definitively prove he's not!" position is so bonkers that it's closer to a conspiracy theory than an actual opinion. > One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. This has been discussed in depth elsewhere. You're understanding of this concept is fundamentally flawed. Frankly, even if it wasn't, you're suggesting that a single firm shorted more than 100%? Or that both Melvin Capital and Citron both shorted more than 100%, and that somehow added up (with your misunderstanding) to 140%?
  - dataflow 6y ago
    Question: what do you think of this comment? https://news.ycombinator.com/item?id=25984635 https://news.ycombinator.com/item?id=25984635
    - nrmitchi 6y ago
      That is quite literally a different argument. The argument being made is that the original funds never exited their original ~$10 shorts. So every $100 increase in stock price is a 10x increase in losses. If someone re-entered at ~$300, a $100 increase would be a 30% increase in loses. The scale of these is massively different. I have absolutely no doubt that other firms have entered short positions. Claiming that "Melvin may have re-entered afterwards" is obviously a possibility, but is not the same as having lied about exiting in the first place.
alasdair_ 6y ago
>If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. The claim that Melvin closed their position is something of a game of "telephone" in that it was a CNBC anchor that claimed that "from what I understand" Melvin Capital is out of the stock, after he talked to the CEO (off camera). Importantly, there was no recording of the conversation, just a journalist claiming a source said something. The fact he used "from what I understand" instead of a direct quote is telling. Melvin themselves have not (as far as I can see) issued any kind of statement, written or otherwise, that clearly states they have zero position on GME any more. All of the other stories about the claim simply state "according to CNBC". My point is that as far as I can see, there is no evidence that Melvin are actually out of their position, other than easily-deniable comments that a single journalist claims "from what I understand" on. Link here to the video from CNBC: https://www.cnbc.com/video/2021/01/27/melvin-capital-sells-out-of-gamestop.html https://www.cnbc.com/video/2021/01/27/melvin-capital-sells-o...
- flunhat 6y ago
  You are purposefully misquoting Andrew Ross Sorkin. The "from what I understand" refers to the time Melvin Capital closed their position, not the overall fact that their short interest is closed. The full quote from Sorkin's segment, ~40 seconds into the video: "Melvin Capital is now out of the stock. They got out of the stock, from what I understand, yesterday afternoon." (https://twitter.com/cnbc/status/1354406938319216640 https://twitter.com/cnbc/status/1354406938319216640). It could not be more clear -- "from what I understand" refers to the precise timing and not the overall fact. > The claim that Melvin closed their position is something of a game of "telephone" in that it was a CNBC anchor that claimed that "from what I understand" Melvin Capital is out of the stock, after he talked to the CEO (off camera). That's not a game of telephone, that's quoting a direct source. Sorkin talked to the CEO of Melvin Capital right before he went on air and then immediately reported it. > just a journalist claiming a source said something And it's not "some CNBC anchor," it's a well known journalist (Andrew Ross Sorkin) with a reputation at stake. > All of the other stories about the claim simply state "according to CNBC". Because CNBC got the scoop. It's journalistic etiquette! > no recording of the conversation, just a journalist claiming a source said something Every single article published in any newspaper ever is a journalist claiming a source said something. > Melvin themselves have not (as far as I can see) issued any kind of statement, written or otherwise, that clearly states they have zero position on GME any more. The CEO of Melvin Capital calling a prominent CNBC journalist counts as a statement, if you're willing to put aside your rabid paranoia for a few minutes and think critically instead of conspiratorially.
imtringued 6y ago
>2. The second argument is reddit cargo culting "game theory", and it violates both logic and Occam's Razor. If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. Either of those will pierce the veil of your firm and leave your personal assets liable for reclamation by the SEC and/or angry investors. You will be sued. You will lose. Yeah but your shorts will be in the money and you probably double your investments instead of losing 53%. There is more to gain than lose.

flunhat 6y ago

Thank you 1000x for writing this. I thought I was going insane reading all the comments like “Melvin publicly said they closed their short position, which is suspicious because they said it publicly (if they said nothing, you all would still find it suspicious!), so they are probably lying about closing their short position”

alasdair_ 6y ago
Can you provide a source that states Melvin publicly said this? All I can find are references to CNBC where a journalist claims "from what I understand" Melvin is out of the stock. The problem with this is that it's easy for the CEO to later say "the journalist misunderstood" or "I said we covered some of our position (1% is 'some' right?)" or many other things. Is there a definitive statement from Melvin themselves anywhere?

m3kw9 6y ago

Makes sense, but don’t let this spoil the party back at wsb

Anon1096 6y ago
You'd just get banned if you write this there.

lc3sim 6y ago

I am not a financial advisor and this is not financial advice. I understand your response. There is one assumption that I think marks the difference between what side of the line one falls on. My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. In exercise, I believe this to be the crux of the speculative argument that Melvin is dumb enough to use psychological warfare (which may have legal ramifications if they get caught) to try to get GME stock back down.

nrmitchi 6y ago
> I am not a financial advisor and this is not financial advice. Okay as soon as I read this I knew I shouldn't be expecting much, but... > My understanding of your belief is that you think Melvin would not lie due to there being a large risk associated with lying. This really isn't just lying a little bit, and isn't just a large risk. If you're running a fund like this, purposely making materially false statements like this would be akin to jumping out of a plane without a parachute and somehow hoping for the best, while 5M angry redditors are purposely trying to make sure you crash into the hardest thing possible. This position of "well maybe he's lying, you can't definitively prove he's not!" position is so bonkers that it's closer to a conspiracy theory than an actual opinion. > One might also assume that Melvin would not be dumb enough to short over 100% of GME stock. This has been discussed in depth elsewhere. You're understanding of this concept is fundamentally flawed. Frankly, even if it wasn't, you're suggesting that a single firm shorted more than 100%? Or that both Melvin Capital and Citron both shorted more than 100%, and that somehow added up (with your misunderstanding) to 140%?
- dataflow 6y ago
  Question: what do you think of this comment? https://news.ycombinator.com/item?id=25984635 https://news.ycombinator.com/item?id=25984635
  - nrmitchi 6y ago
    That is quite literally a different argument. The argument being made is that the original funds never exited their original ~$10 shorts. So every $100 increase in stock price is a 10x increase in losses. If someone re-entered at ~$300, a $100 increase would be a 30% increase in loses. The scale of these is massively different. I have absolutely no doubt that other firms have entered short positions. Claiming that "Melvin may have re-entered afterwards" is obviously a possibility, but is not the same as having lied about exiting in the first place.

alasdair_ 6y ago

>If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. The claim that Melvin closed their position is something of a game of "telephone" in that it was a CNBC anchor that claimed that "from what I understand" Melvin Capital is out of the stock, after he talked to the CEO (off camera). Importantly, there was no recording of the conversation, just a journalist claiming a source said something. The fact he used "from what I understand" instead of a direct quote is telling. Melvin themselves have not (as far as I can see) issued any kind of statement, written or otherwise, that clearly states they have zero position on GME any more. All of the other stories about the claim simply state "according to CNBC". My point is that as far as I can see, there is no evidence that Melvin are actually out of their position, other than easily-deniable comments that a single journalist claims "from what I understand" on. Link here to the video from CNBC: https://www.cnbc.com/video/2021/01/27/melvin-capital-sells-out-of-gamestop.html https://www.cnbc.com/video/2021/01/27/melvin-capital-sells-o...

flunhat 6y ago
You are purposefully misquoting Andrew Ross Sorkin. The "from what I understand" refers to the time Melvin Capital closed their position, not the overall fact that their short interest is closed. The full quote from Sorkin's segment, ~40 seconds into the video: "Melvin Capital is now out of the stock. They got out of the stock, from what I understand, yesterday afternoon." (https://twitter.com/cnbc/status/1354406938319216640 https://twitter.com/cnbc/status/1354406938319216640). It could not be more clear -- "from what I understand" refers to the precise timing and not the overall fact. > The claim that Melvin closed their position is something of a game of "telephone" in that it was a CNBC anchor that claimed that "from what I understand" Melvin Capital is out of the stock, after he talked to the CEO (off camera). That's not a game of telephone, that's quoting a direct source. Sorkin talked to the CEO of Melvin Capital right before he went on air and then immediately reported it. > just a journalist claiming a source said something And it's not "some CNBC anchor," it's a well known journalist (Andrew Ross Sorkin) with a reputation at stake. > All of the other stories about the claim simply state "according to CNBC". Because CNBC got the scoop. It's journalistic etiquette! > no recording of the conversation, just a journalist claiming a source said something Every single article published in any newspaper ever is a journalist claiming a source said something. > Melvin themselves have not (as far as I can see) issued any kind of statement, written or otherwise, that clearly states they have zero position on GME any more. The CEO of Melvin Capital calling a prominent CNBC journalist counts as a statement, if you're willing to put aside your rabid paranoia for a few minutes and think critically instead of conspiratorially.

imtringued 6y ago

>2. The second argument is reddit cargo culting "game theory", and it violates both logic and Occam's Razor. If you're a fund manager who lies to the public about closing a highly volatile position that could bankrupt you, you are facing securities fraud and violation of fiduciary duty, respectively. Either of those will pierce the veil of your firm and leave your personal assets liable for reclamation by the SEC and/or angry investors. You will be sued. You will lose. Yeah but your shorts will be in the money and you probably double your investments instead of losing 53%. There is more to gain than lose.