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Meet The Hedge Fund That Made A Killing On The Reddit-Fueled Short Squeeze

Tyler Durden's Photo
by Tyler Durden
Wednesday, Feb 03, 2021 - 03:55 PM

So much for "sticking it to the suits".

The unfortunate reality of Wall Street is that, sooner or later, we knew that hedge fund players would emerge who capitalized on the Reddit-fueled squeezes of the last two weeks. 

One such fund was Jason Mudrick’s hedge fund. Mudrick Capital Management  made almost $200 million, fueled by stakes in names that squeezed higher during the GameStop frenzy, according to Bloomberg. His fund made 9.8% in January, one of the best months since the fund's inception. Most of its gains came from debt and equity options in AMC and volatility bets in GameStop. 

The fund has $3.1 billion under management and booked most of its gains last week. It also sold about $50 million worth of out of the money call options on AMC, the report says. Back in September, AMC had "signed a commitment letter with Mudrick Capital that called for the hedge fund to buy $100 million of new secured bonds that pay 15% cash or 17% deferred interest," the report notes. 

Mudrick bought AMC's second-lien bonds for 7 to 20 cents on the dollar, before they rose to about 70 cents on the dollar last week. His firm specializes in distressed debt investments and is in the process of expanding further into Europe. It recently bought a credit hedge fund run by CVC Credit Partners. 

As we have already noted, Silver Lake also saw about $113 million in gains from converting AMC debt it was holding to stock, before selling the stock into the rally. 

Many other funds, including several of the "Tiger Cubs" weren't so lucky, Bloomberg noted. Numerous firms with ties to Julian Robertson's Tiger Management racked up losses during the run up:

  • Glen Kacher’s Light Street Capital Management lost 13% last month
  • Steve Mandel’s Lone Pine Capital dropped 6.4%.
  • Coatue Management ended the month little changed
  • Chase Coleman’s Tiger Global Management eked out a 1% gain
  • Rob Citrone’s Discovery Capital Management, a macro-focused fund, jumped 6.5% for the month
  • Ricky Sandler’s $7.8 billion Eminence Capital fell 10.5% last month in his hedge fund
  • Whale Rock Capital Management sunk almost 11% in its technology, media and telecommunications-focused fund
  • Marshall Wace’s $4.4 billion long-short MW Global Opportunities Fund slumped an estimated 7% in January, its worst-ever monthly decline

As a reminder, while hedge funds were cashing out - we wrote yesterday that Reddit user and de facto WallStreetBets leader "Deepfuckingvalue", after initially making a killing on GameStop's move to $350, had lost $19 million over the course of just two days.

DFV, also known as Keith Gill, became the Pied Piper of GameStop, sharing screenshots of his portfolio which inspired thousands of amateur retail investors to follow him into the ailing retailer too, while orchestrating the biggest short squeeze ever.

Sadly for Gill, after his account peaked in the middle of last week, it's all been downhill, and the money that took Gill over a year to accumulate he lost more than half in just two days: on Feb 1, DFV was down $5.2 million to $35.8 million including the cash, or $22 million in GME securities...

 

... followed by a record drawdown yesterday, when he lost $13.6 million bringing the value of his GME securities to just $8.4 million.

While for a hedge fund this sum is pocket change, for a trader who started off with $50,000 and worked diligently for nearly two years to build up a loyal following, the amount means months of hard work flushed down the drain. For most Americans, it's an amount they can only dream of.

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