A hedge fund that made losses betting against GameStop
in the first meme-stock rally has been forced to shut down, according to reports.
London-based White Square Capital suffered double-digit percent losses in January from its investment in the U.S. videogame retailer, and has now written to investors to warn that it will shut its main fund and return money back, The Financial Times reported, citing sources.
Read: GameStop Completes Equity Offering After Raising More Than $1B
White Square, which was founded by Florian Kronawitter, a former trader at Paulson & Co, had managed up to $440 million in assets. It was approached for a comment by email.
The term meme stock was coined after individual investors targeted companies on social media, which in some cases saw shares dramatically rise. This caused some hedge funds with short positions — where a stock is sold first with the intention of it being bought back later in the hope a profit can be made from the price dropping — having to close their positions to prevent crippling losses.
Some hedge funds that were more successful than others are stemming their losses, and White Square is thought to be one of the first hedge funds to close following the sharp price movements.
Read: GameStop Stock Is Gaining After Completing Its $1.1 Billion Share Sale. Here’s Why.
However, the fund is said to have recovered from much of the January losses, and the newspaper reported the decision to shut the fund was unrelated to the meme-stock rally but due to a review of its business model.