Gabriel (or Gabe) Plotkin is a young investment manager who was heavily involved in the GameStop short squeeze of 2021. After potentially being involved with insider trading at one of his first jobs, Plotkin went on to create his own firm that ended up being extremely successful. However, the events of the past year have put his career in a state of jeopardy.
Plotkin told the House Committee on Financial Services earlier this year that his young firm was not in the wrong during the GameStop short squeeze. He assured the committee that his people were not part of any manipulation or sketchy business practices, but it remains to be seen if that’s completely true. After the events of the GameStop short squeeze, Plotkin’s net worth plummeted by over 50%. Read on to find out how much he’s still worth.
Who Is Gabriel Plotkin?
If you haven’t heard of Gabriel Plotkin, here’s a basic overview to get you up to speed. Plotkin, who grew up in a middle-class family in the city of Portland, Maine, is the founder of Melvin Capital Management LP. Melvin Capital Management is an investment management firm based in New York City.
Plotkin is incredibly young compared to many of his peers in the investment management world. He founded Melvin Capital only seven years ago, in 2014. He named the firm “Melvin” after his late grandfather, who ran a convenience store back in the day. The pace at which Melvin Capital Management became big enough to be included in as many financial conversations as they are now is quite impressive.
“I wanted the firm to represent [my grandfather’s] values: Integrity, hard work, taking care of customers and employees, and commitment to excellence,” Plotkin said.
So, on that note, besides being a rapidly growing young firm, what makes Melvin Capital Management such a hot topic this year? Well, they were heavily involved in one of the most shocking wall street dramas we’ve ever seen earlier in 2021.
Plotkin’s investment management firm has a focus on investments in technology. They also focus on consumer stocks. As of January 2021, they reportedly had about $8 billion in assets. However, that number might have been a lot higher had this firm not been involved in the infamous GameStop stock controversy of 2021.
Melvin Capital Management suffered pretty rough losses during the GameStop short squeeze: About 53%, in fact. During Q1, the firm’s assets went down about 49% due to the event.
Read on to learn about the rise and fall of Gabriel Plotkin, and the hits his large net worth took due to the drama surrounding his business dealings.
The Beginning of the Storm: SAC Capital
Plotkin graduated with a degree in Economics from Northwestern University in Evanston, IL, in 2001. Shortly after graduation, Plotkin landed a spot at a multinational hedge fund and financial services firm called Citadel LLC. Citadel was founded in 1990 by Ken Griffin, who is also the CEO and co-CIO of the firm.
Not long after this, Plotkin was already working for another hedge fund called North Sound Capital in Connecticut. Later, before he founded Melvin, Plotkin was employed as a trader at SAC Capital, a group of hedge funds founded in 1992 by Steven A. Cohen. However, SAC capital is no longer in operation due to some shady business dealings that occurred while Plotkin was employed there.
In 2010, the Securities and Exchange Commission (SEC) began an investigation into SAC Capital. They did this in order to see if the group was involved in insider trading, which is the trading of a public company’s stocks, bonds, or stock options because of information the trader knows about the company. This is information that would not be known to the general public, so for someone to trade based upon it would be unethical and illegal.
Three years after the investigation began, the U.S. department of Justice indicted multiple employees at SAC for insider trading. By November of that year, SAC as a whole pled guilty to the charges of insider trading, which cost them about $1.2 billion in penalties. That is in addition to the $616 million that they paid to the SEC. By 2016, the firm that once employed about 800 people was no longer in existence.
The controversy at this earlier job of his foreshadowed the challenges that would later befall Plotkin’s company. This is why the spotlight is shining on him extra hard, and his financial moves are being picked apart left and right.
When Plotkin was a young trader at SAC Capital, he reportedly managed a portfolio of consumer stocks that was worth about $1.3 billion. Such a responsibility would usually be a dream come true for an investment portfolio manager. But things took a turn when Reuters called out Plotkin for being one of the players talked about in a SEC civil complaint against another portfolio manager at SAC Capital, Michael Steinberg.
Steinberg was arrested for trading Dell stocks after receiving insider knowledge about their value. According to the Reuters report, Plotkin was mentioned in the civil complaint as “Portfolio Manager B,” who had received many emails containing insider information from Michael Steinberg and others.
Despite this, Plotkin was able to leave SAC capital with a reputation solid enough to launch his own firm.
The GameStop Controversy
Let’s journey back to the beginning of this year, when American video game retailer, GameStop–of all businesses–became one of the most talked-about entities in the news. In January of 2021, a short squeeze of GameStop stock took place.
A short squeeze is a fast increase in the price of a stock that occurs due to an excess short selling of that stock. While investing usually works by folks putting money into stocks that will later be worth much more than they are now, short selling allows investors to make a profit if the stock’s value decreases.
Short selling is not necessarily a bad thing; it can help investors to hedge risks in their portfolio, and banning the practice has actually proven to have a negative effect on financial markets. However, when investors use short selling in sketchy and self-serving ways, folks notice. This is what happened when members of a subreddit on Reddit, r/wallstreetbets, coordinated to short squeeze the GameStop stock, which they believed institutional investors were undervaluing.
The short squeeze worked, and the value of GameStop stock has been erratic ever since. Even though the squeeze peaked in January, the price of the stock continues to fluctuate in shocking ways. In late February, the GameStop stock price doubled in just an hour and a half. On March 24, the stock price fell 34%, and the next day, it rose 53%.
In February of 2021, Plotkin spoke to the House Committee on Financial Services to discuss Melvin Capital’s involvement in the GameStop drama. Others who testified to the House Committee at the same time included Citadel’s Ken Griffin; the CEO of Robinhood, Vlad Tenev; Reddit co-founder and CEO, Steve Huffman; and ‘Roaring Kitty’ Keith Gill.
Plotkin’s involvement in the SAC insider trading controversy of the 2010s did not set him up well for the GameStop short squeeze drama. All eyes were on him, and his attempts to rectify the situation have so far not panned out well.
“Mr. Plotkin, do you believe that there is manipulation, distrust, and overall inequality within American finance? What do you believe the consequences are for big guys like yourself, but also little guys in this process?” asked Representative Al Lawson of Florida during the House Committee hearing.
“I really can’t speculate, you know, in terms of the broader system,” Plotkin replied. “I think my focus is on running [Melvin’s] portfolio and building a great organization, and a strong team. I think some of the issues you speak about are much greater societally. It’s not really my area of expertise.”
Plotkin’s Net Worth
Gabriel Plotkin’s net worth is currently sitting at about $400 million. That’s not too bad, especially considering the controversy that surrounds his business. However, he reportedly lost about $460 million of his net worth in the GameStop short squeeze.
Despite the turmoil in his work life, he has said he lives happily with his spouse and four children. The $400 million still valued in his net worth probably doesn’t hurt much, either. It’s been reported that he’s currently in the process of renovating a couple of large homes for his family down in Miami.
“I’m humbled by these unprecedented events,” Plotkin said in his opening statement to the House Committee on Financial Services in February of 2021. “Many investors on all sides have experienced losses. I am here today to share my own personal experience, and to be helpful in this conversation…contrary to many reports, Melvin Capital was not bailed out in the midst of these events. Citadel proactively reached out to become a new investor, similar to the investments others make in our fund. It was an opportunity for Citadel to buy low, and earn returns for its investors, if and when our fund’s value went up.”
Whether you love or loathe the way Plotkin has maneuvered his way through the financial world, his success at such a young age is certainly something to behold.