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Video transcription Back transcription Hedge fund chief defends his company’s bet against GameStop At a House Financial Se...


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Hedge fund chief defends his company’s bet against GameStop

At a House Financial Services Committee hearing, Gabriel Plotkin, founder and CEO of hedge fund Melvin Capital, defended his company’s long-term strategy by betting that GameStop shares would fall.

Contrary to many reports, Melvin Capital was not bailed out in the midst of these events. Citadel has 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 cheaply and generate returns for its investors if and when the value of our fund increased. Granted, Melvin was going through a rough patch, but we always had access to the margin and we weren’t looking for an injection of cash. And absolutely none of Melvin’s shorts are part of an effort to artificially lower or manipulate the share price downwards. Nothing in our short position prevents a company from achieving its goals. It’s just Melvin’s take on whether that will be the case. Specific to GameStop, we had a research-backed view long before recent events. In fact, we’ve been running out of GameStop since Melvin’s inception six years earlier, as we believed and still believe its business model of selling new and used video games in physical stores is being overtaken by digital downloads via the Internet. And that trend only accelerated in 2020 when, due to the pandemic, people were downloading video games at home. As a result, the gaming industry had its best year, but GameStop suffered significant losses. In January 2021, a group on Reddit began posting about Melvin’s specific investments. They took the information in our files with the SEC and encouraged others to trade in the opposite direction. Many of these messages were riddled with anti-Semitic slurs directed at me and others. Ordinary investors who were convinced by a deceptive frenzy to buy GameStop for $ 100, $ 200, or even $ 483 have now lost significant sums. When this frenzy started, Melvin started closing his position at GameStop at a loss, not because our investment thesis had changed, but because something new was happening. We have also reduced many other Melvin positions to significant losses, both long and short, which have been the subject of similar publications.

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At a House Financial Services Committee hearing, Gabriel Plotkin, founder and CEO of hedge fund Melvin Capital, defended his company’s long-term strategy by betting that GameStop shares would fall.CreditCredit…Financial Services Committee

Hedge fund Citadel injected billions of dollars into Melvin Capital after that fund’s bet against GameStop went awry, resulting in huge losses. Now, the Citadel recovers some of its money.

The Citadel has informed Melvin of its intention to recoup $ 500 million of the $ 2 billion it injected in late January, according to two people briefed on the matter, who were not authorized to speak publicly. Under the terms of Citadel’s investment, the money will be returned in late September, people said, as the third quarter draws to a close.

The plan of the citadel was first reported by The Wall Street Journal.

The cash injection came in late January as Melvin struggled with a huge turnaround in his short GameStop bet. GameStop’s shares have stalled in recent years as it struggled to reshape itself from a traditional video game retailer into a more modern e-commerce company. But the company’s shares soared in January, after new directors at Chewy.com, which sells pet products, were named and small investors piled in the shares, spurred on by the WallStreetBets forum on Reddit.

Melvin suffered heavy losses as he struggled to cover the costs of his trade in the wrong direction. Some of his other short positions, including his bet against movie company AMC Entertainment, also hurt him.

Citadel, which is based in Chicago, and Point72 Asset Management – a fund based in Stamford, Connecticut, where Melvin founder Gabriel Plotkin previously worked – intervened with a total of $ 2.75 billion in cash on January 25. The injections helped stabilize Melvin, which has generated double-digit returns since February 1, according to one of the people, who was briefed on his performance.

Melvin is still down 41% for this year through July, according to a letter to investors reviewed by the New York Times, due to its heavy losses from January.

As part of its investment, Citadel perceives a reduction in Melvin’s revenue, in addition to the return on his money, the two said. Citadel has also been granted the right to withdraw at least some of its cash as early as the third quarter of this year, the people added – a right it now exercises. (Hedge fund investors are generally required to leave their capital invested for a longer period.) Citadel, which manages $ 38 billion in assets, is itself up about 9% through the middle. August, according to one of the people, who had been briefed on the company’s performance.

Mr. Plotkin declined to comment. Kenneth C. Griffin, founder of Citadel, did not respond to requests for comment.

Point72 remains in place.

“I have the same deal as Ken,” said Point72 general manager Steven Cohen, “and I have no plans to buy back.”

As companies delay the return of employees to their offices, service companies that cater to office workers have suffered.
Credit…Gabriela Bhaskar / The New York Times

New York lags behind the rest of the country in its economic recovery, with an unemployment rate of 10.5% which is almost double the national average. Now, rather than seeing the fuller rebound he was counting on, the city is facing new challenges.

  • Overall employment remains below more than half a million jobs compared to before the pandemic, with significant losses persisting in the leisure and hospitality industries and other areas blue collar workers.

  • Many companies have abandoned plans to bring their employees back to the office in the near future. Boston Properties, which owns nearly 12 million square feet of space in the New York City area, said about 40% of pre-pandemic occupants had returned to its buildings earlier in the summer, based on sweeps of badges in the lobby. By August, that figure had fallen to about 30 percent.

  • It is less clear whether some suburban workers will one day return to the city and their sometimes arduous journeys. Greenberg Traurig, a global law firm, has reduced its planned footprint in Manhattan and now plans to open two new offices on Long Island, where many of its attorneys and investor clients have relocated during the pandemic.

  • More than any other American city, New York relies on international tourists. But European visitors continue to be forbidden. Domestic travelers have returned to New York in increasing numbers, but they don’t stay as long or spend as much as foreign tourists.

There are signs of hope. But even though the city has sponsored an official reunion week, cancellations of trade shows and other big events have mushroomed. READ ARTICLE →

Many states have their own Covid tracking apps to keep local residents informed.
Credit…Google; COVID NY alert

As some people are heading back to office Where Classroom after more than 18 months of pandemic disruption, maintaining social distancing remains a concern, especially with the highly contagious Delta variant nationwide dissemination. New York Times Tech Tip Columnist JD Biersdorfer Has Some Simple Suggestions to use your smartphone to help keep you informed and safe whether you return to work or school.

Stay informed: Regular checks of schools, municipalities, and states can keep you up to date on mask mandates, vaccine requirements, quarantines, and other Covid-related news.

Take your card with you: Some institutions, places and employers now have a vaccine requirement, and many New York companies require proof and will apply it next month. Your paper vaccination record serves as proof, but you can keep it safe at home and go digital.

Change your commute to work: Getting around is more of a challenge for people who use public transport. Last year, Apple and Google coronavirus-related addition business information to their mapping applications, and a latest update from Google Maps now shows occupied zones so you can better avoid the crowds.

Fill the tank : When a drive-through window isn’t an option for having your breakfast or lunch remotely, there are other ways to minimize your exposure, such as calling a pickup order at your local restaurant or bodega.

Takeaway video: The mobile version of your company’s favorite video conferencing app lets you ditch a conference room and take a meeting anywhere, even without your computer.

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