According to an FT report, White Square Capital has told investors that it will shutter its main fund and return its capital later this month after reviewing its business model.
The fund, which managed around US$440mln in assets at its height, had taken short positions on GameStop and suffered double-digit percentage losses in January, according to people familiar with its positioning, as an influx of buying activity in the stock, spurred on by retail traders at the Reddit forum r/wallstreetbets, sent the share price soaring.
White Square was not the only fund to have suffered deep wounds during the GameStop frenzy, with other institutions such as Melvin Capital and Light Street Capital also hit as their own short positions against the stock were smashed by the surge, although both have so far managed to avoid closure albeit with significantly diminished valuations.
Aside from GameStop, other stocks that have been targeted by the retail trading mob amid speculation of heavy short selling activity include cinema chain AMC Entertainment Holdings Inc (NYSE:AMC) and mobile phone maker BlackBerry Ltd (NYSE:BB).
The effect on the share prices of the target firms has been dramatic, with GameStop currently up around 1,061% since the start of this year, while AMC has ballooned 2,671% and BlackBerry has risen 94%.
AMC in particular has witnessed a remarkable reversal of fortune, having narrowly avoided bankruptcy earlier this year as the pandemic forced its cinemas to close and left the company bleeding cash.