GameStop Corp. GME short seller White Square Capital is shutting down after it suffered huge losses during the retail trading frenzy earlier this year, the Financial Times reported.
What Happened: White Square Capital reportedly said in a letter to investors that it plans to close down its main fund and return capital to investors this month following a review of its business model.
The London-based hedge fund, which managed about $440 million in assets at its peak, suffered double-digit per cent losses in January from its bet against GameStop, as per FT.
Why It Matters: White Square Capital’s move to shut down marks one of the first hedge fund closures following the surge in shares of stonks – stocks popular with retail investors.
It was reported in January that hedge fund Melvin Capital lost 53% on its investments that month as amateur traders belonging to the Reddit Investor forum r/WallStreetBets bid up heavily shorted stocks such as GameStop and movie theater chain AMC Entertainment Holdings Inc. AMC to create a short squeeze.
Melvin Capital later received $2.75 billion in investments from hedge funds Citadel LLC and Cohen’s Point72 Asset Management.
In early June, AMC and GameStop short-seller losses swelled up to $12 billion on a year-to-date basis.
Price Action: GameStop shares closed almost 6.3% lower in Monday’s trading at $200.37.
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