Yahoo News Melvin Capital says it wasn't 'bailed out' in GameStop saga
The founder and chief investment officer of Melvin Capital Management, one of the hedge funds at the center of the GameStop (GME) saga, is expected to explain to lawmakers why his firm had been short on the stock years before garnering national attention.
Gabriel Plotkin submitted prepared remarks ahead of the hearings called by lawmakers to clarify what caused a massive short squeeze on the video game retailer's stock and its subsequent decline.
[Read more: GameStop fizzles as stock falls below $50 a share]
In his opening statement Plotkin is expected say his hedge fund had nothing to do with some brokerage firms' decision to restrict GameStop share buys on their platform in late January. Those limits led to a downturn in the price of the stock which continued for days, even as restrictions eased.
"I want to make clear at the outset that Melvin Capital played absolutely no role in those trading platforms’ decisions. In fact, Melvin closed out all of its positions in GameStop days before platforms put those limitations in place," reads Plotkin's prepared remarks.
[Read more: What the GameStop Congressional hearing will reveal to retail investors]
Melvin Capital is one of the hedge funds which had taken a short position on GameStop, while retail investors on Reddit were pouring money into the stock, forcing short sellers to cover their positions, making share prices spike.
Plotkin's remarks indicate Melvin's position in GameStop had been short since the hedge fund's inception six years earlier because the video retailer's business "is being overtaken by digital downloads through the internet."
[Read more: Robinhood CEO denies hedge fund collusion in testimony to Congress]
He says in January of 2021 WallSteetBets members were posting Melvin Capital's investments with information from the hedge fund's SEC filings.
"Many of these posts were laced with antisemitic slurs directed at me and others," according to Plotkin.
"When this frenzy began, Melvin started closing out its position in GameStop at a loss, not because our investment thesis had changed but because something unprecedented was happening," explains Plotkin.
"Investors in Melvin suffered significant losses. It is now our job to earn it back," reads Plotkin's statement.
He also notes "Melvin Capital was not 'bailed out' in the midst of these events," in reference to a capital infusion from the hedge fund Citadel. He notes Citadel "proactively reached out to become a new investor, similar to the investments others make in our fund."
Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre
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