In this article, we will discuss the 5 biggest hedge fund casualties of Reddit WallStreetBets’ short squeezes.
Hedge funds have suffered billions in losses this year in a fierce stock market showdown with retail investors on internet platforms like Reddit and Twitter over the past six months. These battles have usually centered around stocks that the hedge funds attempted to short-sell, inviting the wrath of users on Reddit forums like WallStreetBets, mostly comprising young investors, who bought up stakes in these companies to drive up the share price, initiating a short squeeze and making handsome profits in the process.
Some of the firms involved in this saga include GameStop Corp. (NYSE: GME), AMC Entertainment Holdings, Inc. (NYSE: AMC), ContextLogic Inc. (NASDAQ: WISH), and Clover Health Investments, Corp. (NASDAQ: CLOV), among others.
According to some media reports, hedge funds have suffered a total of $12 billion in losses in these short-selling schemes. Investment bank Goldman Sachs last year compiled an index of stocks that these retail investors favored. That index has doubled in value over the past few months.
5. D1 Capital Partners
D1 Capital Partners is a hedge fund managed from New York. It is placed fifth on our list of 10 biggest hedge fund casualties of Reddit WallStreetBets’ short squeezes. The fund manages more than $13 billion in assets at the end of the first quarter of 2021. It is run by Dan Sundheim.
News publication Bloomberg claims that the fund took a 20% hit in the short-selling saga involving GameStop Corp. (NYSE: GME) in January. D1 was one of the best-performing funds in 2020, finishing the year with a 60% gain and $20 billion in assets under management.
4. Maplelane Capital
Maplelane Capital is an investment firm run from New York. It is ranked fourth on our list of 10 biggest hedge fund casualties of Reddit WallStreetBets’ short squeezes. The hedge fund, run by Leon Shaulov, managed over $4 billion in assets.
In late January, news publication Bloomberg reported that the fund had lost 33% in a single month after a failed attempt to short-sell GameStop Corp. (NYSE: GME) stock. However, the firm adjusted the short position before it took further losses as the share price of the video game retailer climbed because of Redditors.
3. Light Street Capital
Light Street Capital is an investment company headquartered in California. It is placed third on our list of 10 biggest hedge fund casualties of Reddit WallStreetBets’ short squeezes. The hedge fund is a high-profile casualty to the GameStop Corp. (NYSE: GME) short-selling scheme that failed as Redditors squeezed short-sellers.
Light Street Capital, according to Financial Times, managed over $3 billion in assets at the start of the year. This figure has since fallen to $1.8 billion, with losses primarily driven by short-selling attempts in January and May.
2. Melvin Capital Management
Melvin Capital Management is a hedge fund that operates from New York. It is ranked second on our list of 10 biggest hedge fund casualties of Reddit WallStreetBets’ short squeezes. The fund took heavy losses as it tried to short-sell GameStop Corp. (NYSE: GME) in January.
According to a report by news publication CNBC, the fund, managed by Gabriel Plotkin, and with more than $17 billion in assets under management at the end of the first quarter of 2021, was given a bailout worth $3 billion by billionaires Ken Griffin and Steve Cohen in January.
1. White Square Capital
White Square Capital is a London-based investment management firm. It is placed first on our list of 10 biggest hedge fund casualties of Reddit WallStreetBets’ short squeezes.
The firm recently announced that it was closing the main fund and would return capital to investors, according to a report published by news publication Financial Times. This follows the firm taking in double-digit percentage losses in a short-selling attempt involving GameStop Corp. (NYSE: GME) at the beginning of this year. The fund managed more than $400 million in assets at peak.