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Citadel LLC’s Ken Griffin said retail investors that participated in the meme-stock craze of early 2021 contributed to Melvin Capital’s demise. With tens of millions of households getting pandemic relief checks in 2020 and 2021, many people “took a run at the stock market,” he said at Bloomberg Intelligence Market Structure conference.
Griffin pointed out that it’s investors like pension plans that got hurt when retail investors decided to put a short squeeze on GameStop (GME) and other meme stocks in an effort to bring down Melvin, Gabe Plotkin’s hedge fund. “So you basically helped wipe out the pension plans of teachers? You feel good about that?” he asked.
“It’s not Gabe’s money you’re taking down. You’re taking down the money from a pension plan that belongs to a teacher,” he said. On Thursday, Bloomberg, CNBC and other media outlets reported that Melvin Capital was winding down and would return investors’ money. Plotkin had worked at Citadel LLC early in his career, and Citadel invested money in Melvin in January 2021 to stabilize the fund after the meme-stock short squeeze.
Part of the phenomenon was stock trading for entertainment. “There was certainly an entertainment dimension that came into play with money that in some sense just dropped out of the sky into their wallets…and they took a run at the stock market,” Griffin said.
He also put into perspective Gabe Plotkin’s decision to shut down hedge fund Melvin Capital. The average hedge fund lives for about three years, Griffin said. “Several hundred shut down a year and the world goes on.”
As for Plotkin, “Gabe’s was certainly an iconic investor over his career.. over his career, he certainly did an incredible job for his investors, kudos to him.”
“He went through a really tough run. He chose a decision that worked for him.”
The rise and fall of Melvin Capital — a timeline