Citadel LLC is reducing its $2 billion stake in Melvin Capital Management, Wall Street Journal reported today. The move came just after the hedge fund struggled to rebound out of a relatively close collapse prompted by early-year rises in GameStop Corp. and some other “meme stocks.” Citadel sought to retrieve half the investment it and its associates still possess in Melvin’s hedge fund in late January. Moreover, post trimming their stake late last year, Melvin stacked up double-digit deficits again for the second time in January straight, according to sources familiar with the matter.
According to the sources, the most recent withdrawal application will be cashed out by the March end. During January 2021, Citadel and also its affiliates put in $2 billion, with $750 million coming by Steven A. Cohen’s Point72 Asset Management, in return for a share of Melvin’s charges during the coming three years.
Melvin was able to reduce its debt and avoid being compelled to sell because of the uncommon intra-month investment, which was placed as the $12.5 billion investment firm was incurring rising damages from the savage meme-stock boom. Citadel and its affiliates expected to redeem around $500 million from Melvin, according to the Wall Street Journal in August.
After Melvin received funds from several other investment firms, Citadel, who controls roughly $45 billion, ended up retracting even more, cutting its stake. According to some sources, Ken Griffin, Citadel founder, was not pleased with Melvin’s losses in January. Citadel may have repaid even if Melvin would have fared better since the firm is renowned because of being opportunistic. Moreover, it rarely keeps large investments with other fund managers.
Citadel hasn’t decided what, if any, further withdrawals it will make, according to a source familiar with the company. Moreover, according to a source aware of the development, Melvin officials anticipated Citadel’s stake to shrink with time and regard the business as a solid partner.
Melvin Capital Management was established by Gabe Plotkin in 2014. Melvin was among Wall Street’s leading hedge funds until it lost $6.8 billion in January 2021, well over 50% of its holdings.