Investors on Reddit took on the might of hedge fund titans recently. Michael Jordan was caught in the crossfire between the two factions.
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Michael Jordan had sold part of his majority stake in the Charlotte Hornets to Gabe Plotkin in September 2019. Plotkin and Daniel Sundheim held short-selling positions on a game retailer called GameStop.
A hoard of investors from the subreddit called WallStreetBets learned of their position. They invested aggressively in the company, resulting in its stock price soaring a whopping 1700% over the past month. The company sat at $18.84 a share on December 31 2020, but now the price is at $325.00 at the end of the final trading session in January.
Melvin Capital had bet against GameStop by short-selling its shares. This meant that it stood to gain if the price went down, and lose if it went up.
How Michael Jordan is now embroiled in the GameStop phenomenon
Melvin Capital lost over $5 billion in the melee resulting from thousands of retail investors driving GameStop’s stock prise through the roof. The firm required a significant bailout to stay afloat. It has now closed its position and cut its losses, but the firm has lost over 30% of its assets.
Michael Jordan himself was severely affected by the pandemic, which led to a global economic slowdown in 2020. The Bulls legend lost over $300 million of his wealth in this past year, and now his business partners have hemorrhaged their money. However, he still remains worth over $2.1 billion.
Plotkin and Sundheim no longer have the liquidity to contemplate a move to buy more shares from Jordan. They could even be forced to sell some shares in a bid to remain afloat while their hedge funds are in tailspin.
Overall, the future of the Charlotte Hornets ownership group has been thrown into jeopardy. MJ will definitely be weighing his options, possibly trying to find new investors and giving up more shares.
