[wrkronmiller]

> On Wednesday Melvin said it had exited its bet against GameStop and repositioned its portfolio. The firm moved to reduce risk in its investments following a turbulent start to January when it lost 30 percent in the first three weeks. Melvin’s leverage ratio is at the lowest it has been since the firm’s founding in 2014, said a source familiar with the firm. The news of Melvin’s January performance was first reported by The Wall Street Journal.

Which begs the questions: who are the remaining short-sellers and what do their positions look like? Are they other hedge funds with soon-to-expire positions or are they retail investors betting that GME will be back down to $100 or less by next month?

[Judgmentality]

The general assumption on WSB is that Melvin Capital is lying and that they haven't closed their positions.

I haven't seen any evidence to suggest they've closed it, and have seen circumstantial evidence suggesting they have not. You don't spend money on ads saying "we no longer have a financial stake in this stock" unless you, you know, have a financial stake in this stock.

Considering this is a hedge fund, I just assume they're lying because, you know, it's a fucking hedge fund.

EDIT: People are claiming CNBC bought ads, not Melvin Capital. https://i.redd.it/8vxraurkcce61.png

[nickysielicki]

The way that WSB has latched onto Melvin as their enemy is to their detriment. It was never about killing Melvin capital, or at least, it shouldn't have been. It ought to have been about the ridiculous short interest on the stock, regardless of who was funding it. Whether or not Melvin specifically has covered their shorts is irrelevant to how the short interest as a percentage of float has changed in the past week.

https://twitter.com/ihors3 is the source to pay attention to, and he's saying (within the past hour) that collectively, the shorts have been largely covered. It's going to be bloody tomorrow.

... Either that, or magical meme energy is going to defy reason once again. Who knows.

[ajross]

> You don't spend money on ads saying "we no longer have a financial stake in this stock"

I don't think they did. The source of this meme seems to be a Twitter ad from CNBC that was teasing an interview with a quote to that effect. That's a CNBC ad selling their show, they don't take paid ads from their guests.

[fractionalhare]

> Considering this is a hedge fund, I just assume they're lying because, you know, it's a fucking hedge fund.

If this is your prior for approaching evidence, you're always going to catch big finance lying. But not because you're actually calibrated on evidence. And you won't be able to distinguish between actual fraud and baseless conspiracy.

[flunhat]

You should consider at least editing this post given that it has a massive inaccuracy in it, i.e. that Melvin Capital bought ads to communicate not having a position in GME. That was CNBC.

[aardvarkr]

I mean, the obvious play is to short the stock now. Advertising that they're out helps cool the temperature of the storm so they're hoping to capture some value on the way down is my guess.

[londons_explore]

> The general assumption on WSB is that Melvin Capital is lying

If a company issues a commercial press release that turns out to be a deliberate lie, doesn't that usually result in prison time for someone?

Were there ambiguities in the statement?

[Swannie]

If you've watched the big short, you'll understand that the challenge with a short is the timing. You have to get the timing right.

For Melvin Capital, they were right, until they were not - when WSB showed up. They have eaten a loss on this.

But that doesn't mean to say that someone else was not willing to buy their shorts, for a hefty discount, with a significantly longer term time frame strategy (because they don't have to borrow on margin), believing that once it becomes clear that Melvin are out, that Redditors will want out of GME, and GME will likely crash back to something close to its prior levels.

[m3kw9]

Given they lost 53 percent that does indicate the direction they closed a lot of it.

[twistedpair]

Short interest numbers are published on the 15th and 31st of the month. We'll get a look to day on how the shorts have changed over the last 2 weeks.

[newacct583]

The stock is currently around $300, up by a factor of five from last week and much more than that over its historical base. The question should be who isn't shorting GME, not leading questions about a conspiracy theory as to whether or not Melvin actually closed its shorts or not.

I mean, I haven't shorted GME personally. But I've absolutely joked with friends that it's an obvious play. Maybe I should.

[elihu]

I'm not an expert, but my understanding is that this isn't like a tug-of-war where if there are more people betting short than long then the shorts win. It's asymmetrical. There are a finite number of shares and if enough people are willing to hold them at a certain price, then that will be its price. Someone with infinite money can't force the price to drop. (At least not through normal "market" means that don't involve fraud, theft, coercion, changing the rules, or violence.)

Imagine there's an auction for a one-of-a-kind Stradivarius violin, and it's bid up to a million dollars. Maybe you're a violin expert and know that it's only worth a hundred thousand dollars. But if at least two people are willing to bid it up to a million dollars, then there isn't a bidding strategy to cause the violin to sell for less than a million dollars.

Theoretically you could maybe claim to own an identical violin and be willing to sell it for two hundred thousand dollars, but if you don't actually have one it's a lie, and if people take you up on the offer but the price doesn't go down, you're on the hook for it. Which means you'll have to buy the violin at whatever price the person who wins the auction thinks it's worth, or default on your commitment.

[MichaelApproved]

If you can find shares to borrow, are willing to pay the 30% fee, and can handle the swings of a spike higher, go for it.

What will last longer, your solvency or the market’s irrationality?

[fairity]

You can avoid the borrowing fee and margin call risk by purchasing PUT options. The $320 PUT expiring in 1 year costs $240. I purchased 2 contracts on Wednesday bc I don't see a scenario where the price doesn't crash back down below $60 within a year. Expected ROI of 10-20%. Not a large return, but also a pretty safe bet imo considering their ATH prior to this squeeze was $60, and that was back in 2007.

[icedchai]

It seems less risky to buy puts, not short directly. I wouldn’t want to be short if this goes up another 10x, even briefly. It will go back down but you might get wiped out first.

[Tenoke]

Shorts aren't free. Even if you know a stock will eventually drop, benefiting from that is not quite so simple.

[imtringued]

>I mean, I haven't shorted GME personally. But I've absolutely joked with friends that it's an obvious play. Maybe I should.

That's extremely foolish because it will only make the long position safer and safer.

[Moodles]

A better question is: If Melvin made a huge short position and is now finally out of it, why would they bother telling everyone? ;-)

[saurik]

Maybe so investors can evaluate the current status of their hedge fund without thinking there is some massive looming instability about to hit them?

[MichaelApproved]

So investors in Melvin won’t abandon them. They want to reassure their own investors that the damage is done and they’re out.

[Aunche]

My theory is that Melvin sold their short positions to other hedge funds that have enough liquidity to weather the memestorm. Melvin itself is likely just trying to keep their other assets, so they can't afford the shorts. Now that the stock is obviously overvalued, the borrowing fee for GME is insanely high. Buying the shorts from Melvin would be an arbitrage opportunity.

[superzamp]

As many have noticed, from a game theory point of view, Melvin announcing they closed their position is a strictly dominant strategy.

[Tenoke]

Likely just new shorts from a variety of places. I've seen plenty of people opening shorts with the expectations that WSB's play will blow in their face eventually.

[oraphalous]

Yeah - I mean, why wouldn't it attract a bunch more shorts that open their positions at the current highs?

Wouldn't surprise me if Melvin hasn't really closed their position - but it wouldn't be irrational to think that /r/wallstreetbets will at SOME point in the future move on from gamestop to something else.

[tedunangst]

Have you looked at open interest for puts? How do you think that's hedged?

[hntrader]

How up-to-date is that short interest data?