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GameStop, Stock, Chief Financial Officer, Finance, NYSE:GME, Reddit vin Capital CEO Gabriel Plotkin's Testimony on the GameStop Situation!

I believe it’s at uh, 12 p.m. Oh it’s, a it’s, a committee hearing uh. So before we get into this document, i guess uh. Let me just give you a little bit of background uh to just get you caught up so first let’s just talk about melvin capital, um, melvin, capital management. Lp is an american investment management firm founded in 2014 by gabriel plotkin, basically, the same individual who’s, giving that testimony um. It invests primarily in tech and consumer stocks and is reported to have eight billion dollars in assets under management as of january 2021 and in the gamestop short squeeze. They sustain losses of 53, so that’s exactly what the testimony is in regard to and then, as you can see, we have this piece. It says: uh waters announces robin hood, citadel, melvin capital, reddit, ceos and keith gill to testify at committee hearing uh. This was posted on february 12 2021. It says today: congress uh woman, maxine waters. Chairwoman of the house committee on financial services announced the following witnesses for the february 18, full committee virtual hearing entitled game stopped, who wins and loses when short sellers, social media and retail investors collide in terms of the people who are going to be there. We have vlad tenev who’s, the ceo of robin hood. We have kenneth griffin, the ceo of citadel gabriel plotkin, the ceo of melvin capital, steve huffman, who’s, the ceo and co founder of reddit, and we have keith gill uh.

The virtual hearing will be held on february 18 at 12 p.m. Uh eastern standard time and additional witnesses may be named, and everything is basically going to be in regard uh to the market volatility that we saw in january, involving gamestop stock and other stocks. So now let’s just get into uh the testimony of gabriel plotkin, the founder and chief investment officer of melvin capital management uh. Basically, he says i would like to thank you for this opportunity to share melvin capital’s perspective on the recent trading activity in gamestop i’m. The founder and cio of melville capital, he said i’m humbled by these unprecedented events. Many investors on all sides have experienced losses. I am here today to share my personal experience and be helpful in this conversation. Like we already mentioned, his personal experience includes losing uh 53 uh percent during the entire gamestop fiasco. Uh. One of the points that he makes is that he wants to make clear out the outset. The melvin capital played absolutely no role in those trading platforms, decisions and and what he’s referring to here is uh the um, the trading platform’s decisions uh to limit trading in gamestop stock. So you know that would include brokerages such as robinhood, and we also had some other brokerages that basically limited uh trading on uh gamestop stock and what he says is basically that they played no role in those decisions. He said in fact, melvin closed out of all of its positions in gamestop days before platforms put those limitations in place.

Like you, we learned about those limits from news reports and that was basically uh, one of the other things that really made retail investors mad uh, because uh robin hood did not just initially end up limiting uh the stock trading of stocks such as gamestop and other Heavily shorted stocks, you know such as nokia, bed, bath and beyond and amc, but they even went ahead and limited the trading of some stocks that weren’t on the the list. Before such as stocks such as uh starbucks, we had general motors beyond meat, uh, moderna, amd and workhorse. So the fact that something like this could happen uh to retail investors. This was something that really uh, you know made the retail investors mad, and so, if uh, therefore, in that line, uh all uh gabriel plotkin is saying, is that neither him nor melvin capital uh were involved in you know the robin hood’s decision to restrict trading um. Now, moving on, he also said, i also want to make clear at the outset that, contrary to many reports, melvin capital was not bailed out. In the midst of these events, citadel proactively reached out to become a new investor similar to the investments others make in our fund. It was an opportunity for citadel to buy low and earn it returns for its investors. If and when our fund’s value went up to be sure, melvin was managing through a difficult time, but we always had margin excess and we were not seeking a cash infusion.

Now let me explain what that means. So, of course, you know when uh melvin capital had gamestop, but you know they were selling it short and then all of a sudden you have retail investors buying up gamestop stocks, sending it higher and higher uh a firm like melvin capital, was continuing to burn through Money and therefore we had uh this uh wall street journal news, and this was on january 25th, 2021 it’s a citadel point 72 to invest at 2.75 billion dollars in in cash into melvin capital management. Uh firms invest in hedge fund and receive non controlling revenue shares. Melvin has lost nearly 30 since the start of the year, so citadel llc point 72. Asset management are investing 2.75 billion in hedge fund, melvin capital management, an emergency influx of cash that is expected to stabilize what has been one of the top performing funds on wall street uh. So, as you can see, the initial report was that, since they were losing money, they really, you know, importantly needed that cash in order to you know stabilize uh their fund. However, what uh gabriel plotkin is saying now is that you know those funds were actually not because they were going through a bad time which is kind of hard to believe, but simply rather because citadel wanted to, you know, make an investment, and then, along with that, He says that you know throughout this entire time, even though they were going through a difficult time, he’s stating that they basically weren’t, because they had margin x’s and we’re not seeking a cash infusion.

So i just thought that point was interesting. Uh from here you know he goes into his background, melvin capital. He talks about his experiences uh. He talks about how he grew up in humble beginnings and basically by working hard, he was able to get to the position that he is today uh. Moving on from that, we get into melvin capital’s investment strategy, so he says we specialize in the consumer and technology sector, including companies like gamestop, autozone and expedia. Most of our investments are long. In other words, we buy stock in companies that create jobs, grow the economy and develop new products for consumers. When our research suggests, a company will not live up to expectations and his stock price is overvalued, we might short a stock and like with our long positions. Our practice is to short a stock for the long term. After extensive research, there are laws governing shorting stock and, of course, we always follow them. In addition, it’s very important to understand that absolutely none of melvin’s short positions are part of any effort to artificially depress or manipulate downward the price of a stock and nothing about her short position prevents a company from achieving its objectives. It is just melvin’s view about whether it will now he talks about their game style position. He said we had actually been short gamestop since melvin’s inception six years earlier, because we believed and still believe, that its business model of selling, new and used video games and physical stores is uh being overtaken by digital downloads uh through the internet uh, and that trend Only accelerated in 2020, when, because of the pandemic, people were downloading video games at home, now we’re going to talk about that in just a second but moving on he talks about the january frenzy.

He said a group on reddit began to make posts about melvin’s, specific investments and they encouraged others to trade in the opposite direction, and he even talks about you know how he was personally attacked. He had a whole bunch of different messages that were sent to him. Uh moving from that eventually, he said when this frenzy began. Melvin started closing out his position in game, stop at a loss, not because our investment thesis had changed, but because something unprecedented was happening. We also reduced many other melbourne positions at significant losses, both long and short, that were the subject of similar posts. So it’s kind of interesting to see. You know the kind of impact that us retail investors can have that we were basically able to push a hedge fund like melvin capital. You know up to the boiling point where they had to start. You know closing a lot of their position. Then he talks about looking forward. He says he’s humbled by what happened. Uh investors in melvin suffers uh significant losses. It is now our job to earn it back, and while i do not think that anyone would have anticipated these events, i have learned much from them. I’M, taking steps to protect our investors from anything like this happening in the future, and i look forward to answering your questions now. This is where i really want to talk about. You know some of great gabriel’s uh points now he you know talks about how people in the reddit community were basically saying that you should trade against him and they were basically writing.

Uh. These uh posts on reddit, which stated to you, know, buy uh against whatever melvin capital was doing, and i can understand that. But i think there there is a main takeaway from this that you know gabriel plotkin did not even address um. The main reason that we saw retail investors doing exactly what they were doing was because, if you were to actually take a look uh the short interest in the shares of gamestop stock we’re at 114 in the middle of january. Now, for those of you who may not know what that means, that basically means that there were more shares that were sold short in gamestop stock than there were shares outstanding. Now what retail investors saw was that hey? You know you have this stock that is being ridiculously over uh. You know sold short, so rather they weren’t really attacking. You know the fundamentals of gamestop, rather, what they were attacking was the fact that you know if a professional hedge fund and the professional money managers have the ability to basically short game, stop stocks, so heavy that is sold more short than in comparison to the shares Outstanding then, you know why can’t we as retail investors, basically try to do the opposite and try to you know, change the tide in the opposite direction, for gamestop stop, and i think that that’s, one uh point that you know gabriel plotkin did not mention at all. In his testimony – and you know uh, i believe uh – this is the uh original post.

I was basically able to find it on chamathpala hapatia’s twitter, which talked, and it was posted five months ago, and it talks about the real greatest short burn of the century. And you know if you were to really go ahead and read this there’s. A lot of you know, research that actually does go into it and he’s the person who wrote this is not just making completely baseless points and again he met mentions the short interest that i was talking about. He says short interest. Gamestop currently has between 85 percent to 99.8 short interest, depending on what site you use for context. 20 is already considered as high as the moon, tesla and netflix were around 30 to 40 at their peak, but to gamestop’s. Actual short interest is over one hundred ten percent. He even takes a look at the percent shorted uh use uh according to a adjusted float, and that comes in at close to one hundred thirteen percent. He said this is unheard of so he goes uh. The per person goes down to state thanks to money managers literally not using their brain and relying on, i believe, that’s zero math to configure their entire business. We can take advantage of them sleeping at the wheel for a few seconds and cause them to ram into gamestop. For us, this person states by the way this is not a pump and dump. This is a kick in the shorts teeth and uh.

You know the person goes on to talk about uh, the entire you know quote unquote math that go even goes into it. So you know this was really if you are going to be calling this an attack on the money managers or the professional wall street experts. Very similar to what you know, the professional money managers are basically calling it they’re playing victim in this case, but even if you want to call this an attack on them, this was a very elaborate and well planned attack. So again, you know that uh testimony that we’re going to see tomorrow at 12 p.m is going to be very interesting, i’m going to be covering it on the channel. Let me know in the comment section below, if you would like me, uh to cover it, and let me know what you think personally about gabriel’s uh comments in regard to this entire gamestop situation. Like always, i’d love to hear what you have to say down in the comment section below, if you found the video to be helpful, don’t forget to hit the like button. Don’T forget to drop me a comment and don’t forget to subscribe and turn the notification bell. Uh to be up to date on you know, events very similar to this. This is not any sort of financial, nor investment.

What do you think?

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