In the immediate aftermath of the massive short squeeze on GameStop stocks, one name has been catapulted into the spotlight. Short seller Gabe Plotkin, who bet aggressively against the video game retailer, became a frequent target of memes and online ire as subreddit Wall Street Bets engineered a bizarre stock rally.
Plotkin is the founder of Melvin Capitol, a hedge fund that often short sells on struggling retail companies. Plotkin himself has a net worth of $15.6 billion, making him one of the wealthiest people on Earth. However, his company’s shellacking at the hands of Redditors has resulted in them losing billions of dollars on their GameStop positions.
Melvin Capitol Takes a Beating
Melvin Capitol found itself on the receiving end of an unprecedented short squeeze this month when Wall Street Bets realized how aggressive their short stance on GameStop was. As members of that subreddit tell it, there was less market manipulation in play than a simple miscalculation on Melvin’s part: the rate at which they had shorted was insanely aggressive.
As the stock price for GameStop continued to rise ever higher, Melvin found itself holding the bag, and quickly covered its shorts and closed out of GameStop altogether. Many economic experts pointed out that such a massive reliance on short selling is a tough position to hold and keep, since short selling is one of the few stock moves that has the potential for infinite losses.
Plotkin’s Name Is Connected to the Narrative
The narrative surrounding the short squeeze now holds that the amateur traders of Reddit took a chunk out of Wall Street by damaging hedge funds in general and Gabe Plotkin in particular. Indeed, Plotkin’s company did require a cash injection of some $2.75 billion after taking a bath on their GameStop position.
Given the fund’s prior aggressive short stance, WSB has even joked about “hunting” other shorts Melvin has placed and squeezing those stocks, as well. However, in the immediate aftermath of the GameStop squeeze, the fund stated that they’ve begun to reorganize their portfolio. Short selling, in general, is what led to Plotkin’s vast fortunes. However, due to the nature of the tactic, it can backfire massively.
The GameStop squeeze has led to many Wall Street insiders calling for some kind of regulatory oversight in short selling positions. However, since the Redditors have broken no laws and simply invested in a stock they felt was being undervalued, it’s unclear what, if anything, the SEC could do about this situation.