A hedge fund manager worth around $300 million who has been impacted by the GameStop Wall Street Bets saga is expanding his $44 million Miami Beach home, despite his investment firm losing over 50% of its value.
Gabe Plotkin's Melvin Capital Management has lost around 53% of its total value since January of this year after reddit users decided to take on so-called 'short-sellers' by backing their favourite video game outlet 'GameStop'. In January, Melvin Capital Management was worth $12.5 billion.
Short-sellers such as Plotkin and his firm seek to make profits by borrowing stock, selling the stock, and then buying it back later to return to the lender. Normally individuals buy stocks in companies hoping the stock price will rise so they can sell it at a later date for a profit; short-selling turns this on its head with short-sellers making money when the price of a stock falls.
Plotkin and his firm had heavily bet on GameStop stock's short-selling, but a subreddit where people organised a mass purchase of GameStop stock caused the stock price to rise, leaving Plotkin out of pocket. GameStop has suffered financial difficulties in recent years as a result of more videogames being sold online and as a result of the ongoing pandemic shutting its brick-and-mortar stores. It is believed that those on r/WallStreetBets decided to back the GameStop stock out of love for the company and not due to a belief that their investments would make them a profit.
On the 4th of January, GameStop stock was trading at around $17, but by the 27th of January was trading at $347. Those that did purchase the stock early and sold at the peak could very well have seen a 20-fold return on their investment, however in recent days amid a large scale sell-off, the stock price has reverted down to as low as $90. Much of the trading from r/WallStreetBets is carried out via free trading apps such as RobinHood, which eventually curtailed the purchasing of GameStop stock on their platform.
Politicians across the political spectrum from Ted Cruz to Alexandria Ocasio Cortez, and senior business figures such as Elon Musk, criticised those investors who cried foul over the actions of r/WallStreetBets, saying that the billionaire class who had made so much money from short-selling and stock manipulation were hypocritical to criticise the grassroots investment that had been organised.
Plotkin purchased two adjacent homes last year for $44 million and is planning to knock down the $12 million home and turn it into a tennis court. The area is known for its rich and famous residents, including Donald Trump's son-in-law Jared Kushner, actress Cindy Crawford and fashion model Karlie Kloss.
h/t: Daily Mail
COMMENTS