These hedge funds have got torched by the Wall Street Bets army that targeted their short positions in GameStop

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  • Short-sellers have lost over $US5 billion in betting against GameStop as they battle Reddit traders.
  • GameStop’s stock dropped sharply on Thursday, but the damage has already hit hedge funds hard.
  • Insider compiled a list of those hedge funds that got hit hard by the “Reddit army” short-squeeze.
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Video-game retailer GameStop has dominated the headlines this week after its shares trebled in value in just three days this week, in a buying frenzy fuelled by individual traders that have forced some of Wall Street’s prominent hedge funds to close their bearish bets against the company with hefty losses.

GameStop’s shares have hit record highs and the swarm of retail investors behind the rally have cheered each other on, primarily within the popular Reddit forum Wall Street Bets, which by Thursday, had around 3.5 million members.

Members have spent the past three weeks bidding up GameStop, which has sent the shares skyrocketed more than 1,200% since Wall Street Bets first piled in on January 11.

The higher the stock went, the greater the losses incurred by those that had previously bet against any price rises, as they were then forced to buy those shares back, whatever the cost. A number of high-profile hedge funds have already lost more than $US5 billion so far this month, according to data from the financial-analytics firm S3 Partners.

“The stock trading mob ran out of runway with Tesla’s stock and now they have turned their attention to other stocks, like GameStop,” said David Trainer, CEO of New Constructs. “As fickle as the trading mob has been to select GameStop as one of their favourite stocks, they could be just as fickle as to when to let the stock drop,” he said.

But the stock did drop around 64% on Thursday after retail trading app Robinhood restricted its trading along with other highly volatile stocks. The brokerage’s curbs affected other stocks that hedge funds had previous shorted heavily, including AMC, BlackBerry, Bed Bath & Beyond,Express, Koss, Naked Brand, and Nokia.

These are the hedge funds that have lost out in their battle against the day traders:


Point72 Asset Management

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Point72 CEO and chairman, Steve Cohen. AP Images

Steve Cohen’s hedge fund Point72 lost nearly 15% this year as GameStop shares skyrocketed, according to the New York Times. It had around $US19 billion under management.

Melvin Capital was investing some money on Point72’s behalf, the Times reported.


Andrew Left’s Citron Capital

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Andrew Left Citron Research

Citron Research’s Andrew Left threw in the towel on Wednesday, saying he had closed most of the firm’s short position when GameStop’s stock traded at about $US90 at a “loss of 100%.”


Melvin Capital

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Melvin Capital founder Gabe Plotkin Alex Flynn/Getty Images/Bloomberg

Melvin Capital suffered heavy losses during the GameStop saga, causing Citadel and Point72 to inject almost $US3 billion into the ailing hedge fund. Melvin attracted the ire of Reddit users on Wall Street Bets, but the exact scale of its losses are not yet known.


D1 Capital Partners

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Dan Sundheim, founder and CIO of D1 Capital. Alastair Grant/AP Photo; Streeter Lecka/Getty Images; Brendan McDermid/Reuters; Scott Olson/Getty Images; Samantha Lee/Business Insider

D1 Capital Partners has lost around 20% in January as a result of the GameStop saga, Bloomberg reported, citing people briefed on the situation. Dan Sundheim’s fund controlled about $US20 billion at the start of the year.


Maplelane Capital

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Maplelane Capital shed around 33% this month after shorting GameStop, Bloomberg reported, citing investors. The $US3.5 billion hedge fund had bet against GameStop using put options – contracts which let investors bet a stock price will fall.


Candlestick Capital Management

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Candlestick Capital Management’s losses were in the low-to-mid teens in percentage terms, according to the Wall Street Journal. The $US3 billion hedge fund based in Greenwich, CT was started by a former Citadel portfolio manager.