US hedge funds Melvin Capital and Light Street Capital, two short sellers hurt by the GameStop day-trader rebellion earlier this year, saw further declines in May, the Financial Times reported on Thursday.
New York-based Melvin, which lost more than 50% in January over its short positions on GameStop, lost another 4% last month, the report said, citing sources. That brings its overall losses so far this year to about 45%.
Meme stock short-sellers have continued to be squeezed as retail investors remain bullish on popular names like Bed Bath & Beyond, AMC, BlackBerry, and Clover Health. Total hedge fund losses from betting against this pack of stocks amount to $6 billion since the start of May, the FT said, citing data from Ortex Analytics.
At the start of the year, a number of short-sellers lost over $5 billion as Reddit traders formed a snowballing momentum trade that caused GameStop shares to skyrocket. Shorting a stock means an investor is betting a company’s share price will fall. The opposite of this is “going long,” which reflects a belief the price will rise.
Although the value of Melvin’s assets fell $4.5 billion in January from the end of 2020, they have since recovered to $11 billion as of June 1, the FT reported. The fund closed out all of its public short positions, including GameStop and AMC, in the first three months of the year. But it could still have some traditional short positions that aren’t required to be publicly disclosed.
Other funds with extended losses include Palo Alto-based Light Street Capital, founded by Glen Kacher, who started his career at billionaire Julian Robertson’s famous fund, Tiger Management.
Light Street, which had about $3.3 billion in assets under management at the start of the year, was hit by losses on short positions in the first-quarter, the FT said. After losing a further 3% in May, its flagship fund is now down more than 20% this year.
Melvin Capital declined to comment on FT’s report, while Light Street could not be contacted.