Hedge fund caught in meme stock frenzy shuts down

Yahoo Finance's Akiko Fujita and Brian Cheung report news that Melvin Capital, the hedge fund that shorted GameStop in 2021, is winding down its funds.

Video transcript

AKIKO FUJITA: Well Melvin Capital Management is winding down its funds. The once successful hedge fund lost billions of dollars during the meme stock frenzy from it's short position in GameStop. And the firm's performance has fallen yet again amid the recent market downturn. Founder Gabe Plotkin writing in a letter to investors, the appropriate next step is to return cash to all investors. Melvin had reported 7.8 billion under management as of April. And, of course, I know that's a story that you've been following really closely. The timing of all of this.

BRIAN CHEUNG: Yeah, yeah. And GMI, not going to make it. I mean, I think that the market volatility is going to lead to a lot of other funds having issues as well. Not necessarily tied just to the meme trades of 2021, but just you wonder how many levered bets there have been in that market lockup up that we saw in 2021 that's ultimately going to blow up in some of these funds faces.

AKIKO FUJITA: Yeah, tough 18 months.