Melvin Capital Management LP is a New York City-based investment management firm. Gabriel Plotkin created the company in 2014 and named it after his late grandfather.
Plotkin declared on May 18, 2022 that the fund would dissolve and refund all remaining customer cash by July 2022. In April 2022, the assets under administration were estimated to be around $7.8 billion.
Melvin Capital was stated to have $8 billion in assets under management (AUM) as of January 2021, with a focus on technology and consumer stocks. During the 2021 GameStop short squeeze, the company lost 53 percent of its value, or $6.8 billion, losing more than a billion dollars per day at one point; the firm’s assets fell 49 percent in Q1 2021, and it closed the year down more than 39 percent, while the S&P 500 rose 28.7%. Melvin Capital started January 2022 with a 17 percent loss.
Gabe Plotkin’s Net Worth as of Right Now:
The American hedge fund manager Gabriel “Gabe” Plotkin has a net worth that is estimated to be in the range of $400 million. Gabe is most well-known for being the founder of Melvin Capital Management, which, in 2021, engaged in a public argument with a group of redditors on the firm GameStop.
In 2001, he received his Bachelor of Science degree in Economics from Northwestern University. After graduating from college, he found employment with the hedge firm known as Citadel LLC. In addition to that, he had positions with SAC Capital and North Sound Capital, both of which are situated in Connecticut.
SAC Capital of Gabe Plotkin
While working at SAC Capital, he was responsible for managing a $1.3 billion consumer stocks portfolio. Prosecutors from the United States Department of Justice claim that Gabriel received confidential information at some point during his employment at SAC Capital. Plotkin is referred to as “Portfolio Manager B” in the documents filed with the court. According to reports, Plotkin was received a series of emails from another portfolio manager that contained what the SEC regarded to be inside knowledge.
SAC entered a guilty plea in 2013 and agreed to pay a total of $1.2 billion in penalties, with an additional $616 million going to the SEC. Steven A. Cohen, the creator of SAC, then proceeded to return all outside capital and instead founded a family office that he named Point72 Asset Management. In 2016, SAC was completely put out of business.
Melvin Capital: Established by Gabe Plotkin
After the collapse of SAC in 2014, Gabe Plotkin established Melvin Capital Management as a response to the financial crisis. The company, which was rapidly able to raise $1 billion in financing, was given its name by Gabe after his grandfather.
Melvin generated a return on assets of 47% in 2017, its first full year of operation. This result ranked Melvin as the second-best performing hedge fund in the world (among hedge funds with more than $1 billion in assets under management) among hedge funds with more than $1 billion in assets under management. Due to his outstanding achievement during that year, he was awarded $300 million in compensation.By the year 2018, the total assets that were being managed by the fund had increased to $3.5 billion.At the end of the year 2020, the company had 12.5 billion under control.
GameStop of Gabe Plotkin
A tsunami of anger directed at fund managers like Plotkin who aggressively “shorted” the stock of faltering companies was built up by users of the subreddit r/wallstreetbets towards the beginning of 2021. Redditors drew special attention to the short sales of GameStop stock, which at the time was the most shorted stock on American exchanges. GameStop is a company that rents out video games.
The users of reddit banded together to carry out a “short squeeze,” a strategy in which the price of the stock is caused to skyrocket upward, which results in the short sellers losing an enormous amount of money in an extremely short amount of time.
According to reports, Melvin Capital experienced a precipitous decline in the value of its fund as a direct result of the enormous short position that it held in GameStop. Due to the magnitude of the losses, it has been stated that Melvin was forced to make a request for a capital infusion of $2.75 billion from Point72 and Citadel in exchange for the rights to a percentage of the fund’s future income.
The Wall Street Journal reports that Melvin Capital suffered a loss on its assets of 53 percent in only the month of January 2021 alone. According to the same story published in the WSJ, Melvin began 2021 with $12.5 billion in assets and concluded January with $8 billion – and this figure accounts for the 2.75 billion dollars in capital that was poured.
Investment in Michael Jordan and the Charlotte Hornets: In 2019, Gabe and another hedge fund manager purchased a piece of Michael Jordan’s ownership position in the Charlotte Hornets of the National Basketball Association (NBA). The value of the Hornets after the transaction was determined to be $1.5 billion.
Personal Affairs and Property Management of Gabe Plotkin
In November of the year 2020, Gabe shelled out a combined sum of $44 million to purchase two mansions that were close to one another on North Bay Road in Miami, Florida. It was shown in the designs that he submitted to the city that he intended to demolish one of the properties and replace it with a tennis court and some gardens. Additionally, he is a property owner in the city of New York. Since 2006, Gabe Bank-Plotkin has been happily married to Yara Bank-Plotkin.
Plotkin Shuts Melvin Hedge Fund Reeling From Redditor Attack
The creator of the company, who is 43 years old, wrote in a copy of the letter that was viewed by Bloomberg that “the past 17 months has been an exceedingly challenging time for the firm and you, our investors.” “I have provided everything I can, but as of late, that has not been enough to deliver the returns you need to expect,” she said. “I have done everything I can.” I have come to the conclusion that I cannot continue to be responsible for handling outside capital.
The once-promising money manager, who rose to prominence working at Steve Cohen‘s hedge fund before striking out on his own, was the most prominent victim of the meme-stock frenzy that occurred in January 2021. This was the time when retail investors banded together on message boards to drive up the prices of GameStop Corp. and other struggling businesses.
Plotkin had made the error of betting against shares in a manner that was publicly acknowledged. As a result, he lost billions of dollars in the so-called short squeeze, which caused his hedge fund to register a loss of 55 percent during that month.
But then an unexpected second chance presented itself. Melvin received an investment of $2.75 billion from the funds managed by Cohen’s Point72 Asset Management and Ken Griffin’s Citadel, in addition to contributions from partners of Cohen’s Chicago-based firm. Melvin was able to recover some of his losses but still finished the year 39 percent in the red.
Although it was nowhere near the roughly 30 percent improvements he had managed through 2020, this strategy did seem to be a viable path toward eventual recovery. And investors were ready to allow him some wiggle room, realising that the short squeeze that was prompted by Reddit in January was an anomalous incident.