Melvin Capital founder heads to the hill for GameStop hearing
18 February 2021 US
Image: doganmesut/adobe.stock.com
The founder of the investment firm at the centre of the GameStop saga is due to make his case against accusations that his short selling strategy was predatory or involved illegal market manipulation.
Melvin Capital founder and chief investment officer Gabriel Plotkin 鈥� who says he was 鈥渉umbled鈥� by the events of January 鈥� laid out his opening testimony ahead of the US House Committee on Financial Services hearing taking place today.
Plotkin says that Melvin Capital 鈥減layed absolutely no role鈥� in trading platform Robinhood鈥檚 decision to limit trading in GameStop stock and that Melvin Capital closed out all of its positions before buying restrictions were put in place. 鈥淟ike you, we learned about those limits from news reports,鈥� Plotkin will argue.
The popular low-fee stock trading platform was on several volatile 鈥榤eme stocks鈥� including GameStop in order to allow the broker to refinance its collateral account with its central counterparty.
Plotkin will also practices of the firm, emphasising the amount of research that had taken place before deciding to short the struggling bricks-and-mortar gaming retailer. 鈥淚t is very important to understand that absolutely none of Melvin鈥檚 short positions are part of any effort to artificially depress or manipulate downward the price of a stock,鈥� Plotkin says in his pre-released written statement.
The trends Melvin Capital had identified 鈥� downloads are in, stores and trading games are out 鈥� were so entrenched that Plotkin says his firm had been short GameStop since its founding six years ago.
Plotkin鈥檚 testimony also strikes a more human note, detailing the anti-semitic Reddit posts aimed at himself and his fellow Jewish colleagues, which encouraged users to trade in the opposite direction of Melvin Capital after the firm鈥檚 investments, gleaned from its Securities and Exchange Commission filings, were laid bare on the WallStreetBets subreddit.
Elsewhere, Andrew Left, the head of Citron Research, another hedge fund caught out by the short squeeze, has also detailed receiving online abuse and death threats and has since on its short activity.
When the subsequent 鈥渇renzy鈥� began 鈥� in which GameStop鈥檚 stock soared from $17 to a peak of $483 and reflected no 鈥渋ntrinsic value鈥� 鈥� Melvin Capital started closing out its position at a loss, Plotkin said, 鈥渘ot because our investment thesis had changed but because something unprecedented was happening.鈥�
Plotkin says that Melvin Capital also reduced many other long and short positions at significant losses that were the subject of similar posts.
Plotkin also says he wants to 鈥渕ake clear鈥� that contrary to many reports, Melvin Capital was not 鈥渂ailed out鈥� during these events.
鈥淐itadel proactively reached out to become a new investor, similar to the investments others make in our fund,鈥� and the move was simply an opportunity for Citadel to 鈥榖uy low鈥� and earn returns for its investors if and when our fund鈥檚 value went up, Plotkin explains.
Other at today鈥檚 hearing on the impact of short selling on retail investors include Robinhood CEO Vlad Tenev, hedge fund Citadel CEO Kenneth Griffin, Reddit CEO and co-founder Steve Huffman, and day trader Keith Gill, who is credited with rallying the retail interest in GameStop through WallStreetBets.
US congresswoman and committee chair Maxine Waters announced the hearing at the end of January citing a need to address by hedge funds which she claims are 鈥減reying on the pension funds of hard-working Americans鈥�.
Melvin Capital founder and chief investment officer Gabriel Plotkin 鈥� who says he was 鈥渉umbled鈥� by the events of January 鈥� laid out his opening testimony ahead of the US House Committee on Financial Services hearing taking place today.
Plotkin says that Melvin Capital 鈥減layed absolutely no role鈥� in trading platform Robinhood鈥檚 decision to limit trading in GameStop stock and that Melvin Capital closed out all of its positions before buying restrictions were put in place. 鈥淟ike you, we learned about those limits from news reports,鈥� Plotkin will argue.
The popular low-fee stock trading platform was on several volatile 鈥榤eme stocks鈥� including GameStop in order to allow the broker to refinance its collateral account with its central counterparty.
Plotkin will also practices of the firm, emphasising the amount of research that had taken place before deciding to short the struggling bricks-and-mortar gaming retailer. 鈥淚t is very important to understand that absolutely none of Melvin鈥檚 short positions are part of any effort to artificially depress or manipulate downward the price of a stock,鈥� Plotkin says in his pre-released written statement.
The trends Melvin Capital had identified 鈥� downloads are in, stores and trading games are out 鈥� were so entrenched that Plotkin says his firm had been short GameStop since its founding six years ago.
Plotkin鈥檚 testimony also strikes a more human note, detailing the anti-semitic Reddit posts aimed at himself and his fellow Jewish colleagues, which encouraged users to trade in the opposite direction of Melvin Capital after the firm鈥檚 investments, gleaned from its Securities and Exchange Commission filings, were laid bare on the WallStreetBets subreddit.
Elsewhere, Andrew Left, the head of Citron Research, another hedge fund caught out by the short squeeze, has also detailed receiving online abuse and death threats and has since on its short activity.
When the subsequent 鈥渇renzy鈥� began 鈥� in which GameStop鈥檚 stock soared from $17 to a peak of $483 and reflected no 鈥渋ntrinsic value鈥� 鈥� Melvin Capital started closing out its position at a loss, Plotkin said, 鈥渘ot because our investment thesis had changed but because something unprecedented was happening.鈥�
Plotkin says that Melvin Capital also reduced many other long and short positions at significant losses that were the subject of similar posts.
Plotkin also says he wants to 鈥渕ake clear鈥� that contrary to many reports, Melvin Capital was not 鈥渂ailed out鈥� during these events.
鈥淐itadel proactively reached out to become a new investor, similar to the investments others make in our fund,鈥� and the move was simply an opportunity for Citadel to 鈥榖uy low鈥� and earn returns for its investors if and when our fund鈥檚 value went up, Plotkin explains.
Other at today鈥檚 hearing on the impact of short selling on retail investors include Robinhood CEO Vlad Tenev, hedge fund Citadel CEO Kenneth Griffin, Reddit CEO and co-founder Steve Huffman, and day trader Keith Gill, who is credited with rallying the retail interest in GameStop through WallStreetBets.
US congresswoman and committee chair Maxine Waters announced the hearing at the end of January citing a need to address by hedge funds which she claims are 鈥減reying on the pension funds of hard-working Americans鈥�.
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