Hedge fund Melvin Capital Management LP’s year-to-date losses have widened to more than 44% after the recent surge in Reddit-favorite stocks such as GameStop Corp. (NYSE:GME) and AMC Entertainment Holdings Inc. (NYSE:AMC), the Financial Times reported Thursday, citing people familiar with the hedge fund’s performance.
What Happened: Melvin Capital, a high-profile victim of the GameStop short squeeze frenzy earlier this year, lost another 4% in May and its year-to-date losses widened to about 44.7%, according to the report. In comparison, the S&P 500 index of U.S. stocks rose 0.6% in May and has gained 12% in the first five months of this year.
Losses for the hedge fund industry from betting against five stonks — stocks popular with retail investors — total about $6 billion since the beginning of May, according to the report that cited data from analytics firm Ortex. The five stonks are GameStop, AMC Entertainment, BlackBerry Limited (NYSE:BB), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Clover Health Investments Corp. (NASDAQ:CLOV).
Why It Matters: Founded in 2014 by Gabe Plotkin, a former portfolio manager for Steve Cohen, Melvin Capital lost 53% on its investments in January amid the battle between retail traders and hedge funds. The company ended the month with just more than $8 billion in assets under management, after starting the year with roughly $12.5 billion.
Thanks to a series of short bets including against GameStop, losses at Melvin Capital got so bad that the hedge fund received $2.75 billion in investments from hedge funds Citadel LLC and Cohen’s Point72 Asset Management.
It was reported in May that Melvin Capital closed out of all its public bearish positions in the first quarter.
In early June, AMC and GameStop short-seller losses swelled up to $12 billion on a year-to-date basis.
Price Action: AMC Entertainment shares fell 13.2% in Thursday's regular trading session to $42.81, but gained 6.6% in the after-hours session to $45.65.
GameStop shares closed 27.1% lower in the regular trading session at $220.39 but rose almost 4.6% in the after-hours session to $230.50.
Photo by JJBers on Flickr