Hedge Funds are Getting Crushed by the Worst Short Squeeze in a Quarter Century

Article - Media
Matt Egan | 21.02.02
A mob of traders on Reddit’s WallStreetBets page have sent GameStop (GME), AMC (AMC) and other stocks skyrocketing in recent days. GameStop lost a quarter of its value Monday but it’s still up nearly 1,200% on the year. WallStreetBets successfully triggered an epic short squeeze, where investors that bet against GameStop have been forced to unwind their bets and buy the stock back. That in turn has driven GameStop even higher, creating even more losses for short-sellers.

Melvin Capital, a hedge fund that bet heavily against GameStop, lost a stunning 53% of its value in January. The hedge fund eventually had to get bailed out by Citadel and Point72, two hedge funds that provided a $2.75 billion lifeline.
The enormous losses for hedge funds and other short-sellers spilled over into the broader markets last week. The S&P 500 suffered its worst week since October — and some analysts at least partially blamed the Reddit-fueled mayhem.


Hedge funds are getting crushed by the worst short squeeze in a quarter century