Melvin Capital reveals 8 more unfavourable bets that could have led to the January collapse.
Posted On May 21, 2021
Gabe Plotkin’s Melvin Capital management offered a fresh look at the toxic positions the institution was taking at year-end, which would have led to a perfect 53% loss in January.
The sharp drop was largely due to Reddit’s attack on large-cap stocks like GameStop, which hit fast sellers like Melvin and various hedge fund companies. That success prompted Point72 Asset Management and Citadel to invest $2.75 billion in Melvin’s hedge fund to bolster its capital.
In its preliminary 13F fourth-quarter filing, which was released in mid-February, Melvin listed eight stocks on which it held put options. Those stocks include GameStop, AMC Networks, Cryoport, First Majestic Silver, GSX Techedu and Simon Property Group.
On Wednesday, however, Melvin filed an amended application, revealing that as of Dec. 31, she had placed positions in eight other companies that had not yet been named.
The value of common stock in six of those eight companies rose sharply in January. Between January 2 and January 28, the value of one of the eight stocks Melvin had bet on nearly doubled. By January 27, two stocks were up 50% and the other three were up over 20%.
It is unclear from the public record how long Melvin held these selective positions, whether he increased and decreased his bets over the course of the month, and whether he had a full quick position in any of the stocks.
In any event, ViacomCBS was the best-selling of Melvin’s eight new listed stocks, up nearly 50% in the month through January 27.
The recurring stock of Ligand Prescription Drugs, Melvin’s second largest contributor to the new group, had nearly doubled by Jan. 28. The stock then rose 13 percent, peaking on Feb. 9.
Meanwhile, shares of Ollie’s Discount Stores Holdings, another disruptive bet, were up nearly 30% on Jan. 27.
Melvin invested positions in a variety of stocks with much lower market values. Three of these companies were up in value at the end of January.
These include ADT, Kroger and Tabula Rasa Healthcare.
Two of Melvin’s holdings, Trinity and WW Worldwide, did not change in price much in January.
Melvin did not respond to a request for comment.
Plotkin, Melvin’s founder and CIO, spent eight years as a dealer and customer inventory specialist at Sigma Capital Management, then a division of SAC Capital.
Launched in 2014, Melvin is growing rapidly – more than 46 percent in 2019 and 52 percent in 2020.