[djeiasbsbo]

They could have. If they shorted again on tuesday at >300 they could have made a lot of money by covering the next day when the price dropped due to the buy restrictions. At one point in the aftermarket the stock even hit 500$ and the next day went back down to 190$. That is potwntially a lot of money for the right short positions.

[bedhead]

This is dead wrong.

Melvin got a margin call from their prime broker, which is why they needed to get bailed out abruptly by Griffin and Cohen. The mid-month injection shows how dire it was and how margin calls work. Hedge funds like Melvin typically use monthly accounting, so typically you can only add/withdraw capital for the first of the month. But margin calls are fire drills, all the sudden you get a phone call saying, "We need another $3 billion in equity or we liquidate your account" and you either sell stocks like mad (though even in this case I don't think it was an option) or pray you have a white knight sugar daddy like Griffin/Cohen to write a check literally overnight. Melvin had no choice but to cover, they couldn't start doubling down it doesn't work that way, they'd be done, and actually some of these stocks like GME were so volatile that it might even eat into the prime (but really the clearing broker).

[bluGill]

How much does Melvin have? Margin calls are about total value vs short value. If gme was only a small percentage of their shorts at the start they could be well under the 50% capital requirements to not get a margin call. Hedge funds often don't diversify, but they still know the value in it.

Though I tend to agree with those who conclude that they wouldn't risk lieing in their public statements.

[f430]

They have potentially unlimited source of funds at disposal from their parent hedge fund. They often don't shut down especially when they have better information than the public.

They can eat the cost of getting the timing wrong if it means they stand to make a killing which they are poised to do as average retail traders are simply transferring wealth to the pockets of executives and hedge fund managers while thinking they are actually socking it to the big man.

Eventually the stream comes to a stop, a large dip or people cashing out signals an end and a group of retailers who didn't know that they were being pumped are caught holding the bags.

I am now reading on r/wallstreetbets that $30,000/share makes perfect sense and it had like 24k upvotes. This is the type of insanity gripping the subreddit. Now even people who don't even use reddit are asking me how they can buy GME. This is textbook peak bubble even as we are consistently seeing red days across the board.

[fractionalhare]

Melvin does not presently have a parent hedge fund, and it never has. It received investments from two other hedge funds, but those were for non-controlling revenue share.

[f430]

https://en.wikipedia.org/wiki/Melvin_Capital

does seem like a relationship to me and if so they likely have Cohen's liquidity close by. Rarely are these groups independent, they all eat from the same bowl, a very large one at that.

I just do not believe they have thrown in the towel. Wouldn't you be drunk with lust when you realize a very rare opportunity? Timing isn't the concern here its the inevitability of the obvious in the long run. Anytime GME shoots up due to retail exuberance, the probability of bearish plays go up. There's simply no fundamentals that justifies its price.

Benjamin Graham said something about voting machines and weighing scale...

[fractionalhare]

Yes they have a relationship, it's known that Point72 has been an investor. That doesn't imply ownership or even majority stake. It's very common for funds to invest in other funds, just like it's common for large tech companies to have business development and VC arms.

[fractionalhare]

This is extremely unlikely. I'm saying they wouldn't have survived to see $300. You think they managed to live long enough to short at the top tick without being margin called and having their prime broker pull the plug on them?

The doubt around this situation is uncritical. This is a firm motivated by money. If you're seriously interested in making money, you don't lie to the public about closing your positions (boom, securities fraud) and stay in it when the volatility of the thing has destroyed your thesis (boom, breaking fiduciary duty). You get out to trade another day.