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Citadel will redeem $500 million of its shares in Melvin Capital: Report

2021 03 03T224230Z_1_LYNXMPEH221O5_RTROPTP_4_RETAIL TRADING USA CONGRESS.JPGHouse Committee on Financial Services/Handout via Reuters

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The hedge fund Citadel will redeem about $500 million of the $2 billion it invested in Melvin Capital earlier this year as the latter suffered crippling losses amid a short squeeze, the Wall Street Journal reported Saturday. 

The investment was for a non-controlling but revenue-sharing stake in the fund. 

Melvin Capital lost more than half of its value, over $6 billion, earlier this year as retail investors bid up the shares of what became known as "meme stocks" — firms like GameStop, AMC, and others — on which the fund had short positions. The movement was started and led by members of the Reddit group "r/wallstreetbets."

The rising share prices caused Melvin Capital to close its short positions by buying shares of the firms back, which in turn pushed their prices up further.

Citadel, along with Point72, another hedge fund, stepped in to help Melvin Capital at the time. Citadel and Point72 are run by Ken Griffen and Steve Cohen, respectively.

It is unclear if the redemption will be the last from Citadel. The Journal report said that Citadel plans to remain a large investor in Melvin. Melvin capital ended the first quarter down 49%.

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