Melvin Capital, Hedge Fund Torpedoed By the GameStop Frenzy, is Shutting Down

Melvin Capital, the hedge fund run by Gabe Plotkin that struggled with heavy losses last year as it reeled from wrong-way bets on GameStop, is shutting down, according to a letter sent to investors on Wednesday that was reviewed by The New York Times. From the report: Mr. Plotkin wrote to his investors that he had decided that the "appropriate next step" was to liquidate the fund's assets and return cash to all investors. Mr. Plotkin, who founded Melvin in 2014, also wrote that he recognized he needed to "step away from managing external capital." Mr. Plotkin, a protege of the hedge fund billionaire and New York Mets owner Steven A. Cohen, had wagered that shares GameStop, AMC Entertainment and other mall mainstays from the 1990s would fall as their businesses shrank. Instead, the stocks skyrocketed when amateur investors, coordinating via Reddit, Twitter and other social media sites and determined to outsmart big Wall Street funds, kept buying up shares and propping up their price. That caused Melvin, which started 2021 with more than $12 billion, to lose 53 percent in January, forcing it to scramble to cover its so-called short positions. It was propped up by a $2.75 billion bailout from the hedge funds Point72, run by Mr. Cohen, and Citadel, as well as fresh capital from new investors.

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