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Citadel Set to Make Bank on Meme Stock Resurgence

Meme stocks are back — and this time around Ken Griffin’s Citadel Advisors is on the same side as the retail investors who are pushing the stocks higher.  

In recent weeks, shares in companies like GameStop, AMC Entertainment, and Bed Bath & Beyond have jumped on retail buying. At the end of June, some of the biggest owners of those stocks were hedge funds Citadel Advisors, Coatue Management, Mason Capital and Millennium Management.

Citadel appears to be the hedge fund winner in this latest meme stock rally, which is being led by Bed Bath & Beyond. As of June 30, Citadel owned 2,305,711 shares of the struggling retailer — increasing its position by some 5,676 percent during the quarter, according to Nasdaq. Since then, the stock’s price has shot up, going from around $5 to almost $25 per share, meaning Citadel would have made more than $46 million on the position if it had not changed since the quarter’s end.

Shares of Bed Bath & Beyond soared about 30 percent Tuesday amid several trading halts due to the spike in activity, which was boosted by the news that GameStop Chairman Ryan Cohen bought more call options on the struggling retailer. The stock rose another 12 percent on Wednesday, and is up about 400 percent since late July, with a record 1.14 billion shares traded, according to Bloomberg. (When Cohen revealed plans to sell his stake after the market closed on Wednesday, the stock fell 20 percent in after hours trading.)

Of the three stocks, Bed Bath & Beyond is the most susceptible to a short squeeze of the kind that led to the original meme stock rally in January 2021. Of the three stocks, Bed Bath & Beyond now has the largest short interest, which S3Partners calculates at 55.23 percent of the float. This year, shorts are down more than $500 million in Bed Bath & Beyond, according to S3 Partners, which said in a report Wednesday that it expects the “short squeeze to continue as mark-to-market losses continue to mount,” with “more new short sellers getting in at these higher stock prices looking for a whipsaw of stock prices down.”

Meanwhile, short interest in both AMC and GameStop has receded from the highs that led to the original meme stock rally, but is still substantial. The short interest in AMC is almost 18 percent of the float, according to S3 Partners.

Hedge funds have also been bulking up their long holdings of both meme stocks, according to quarterly 13F filings with the Securities and Exchange Commission. Millennium was the seventh largest AMC holder as of June 30, boosting its position by more than 200 percent during the quarter. Coatue also added to its stake in in AMC, which gained 46 percent over the past month. 

Although its position is smaller than the other hedge funds, Citadel boosted its holding in AMC by some 657 percent during the quarter — putting Griffin’s hedge fund squarely on the same side as the AMC investors who have trolled him on Twitter and elsewhere.

“I don’t believe for a second he is on our side,” said AMC and GameStop investor Katherine Larsen, who has led many of the attacks on Griffin, when told that Citadel was long AMC.

Retail investors have blamed Citadel Securities, which bought retail order flow from RobinHood, for the trading halts of the meme stocks last January. Griffin has repeatedly denied having any role in the halts, the SEC found no evidence suggesting otherwise, and a federal judge threw out a lawsuit against Citadel Securities and others that made similar allegations.

In addition to Bed Bath and Beyond and AMC, the OG meme stock — GameStop — is up 16 percent over the past month, and about 28 percent since its July bottom. It still has a fairly sizable short interest of about 22 percent of the float, according to S3 Partners.

The big hedge fund winner in GameStop now is Mason Capital, which was its fourth largest shareholder as of June 30. Coatue was also a substantial owner.

Citadel, Coatue, and MIllenium declined to comment. Mason did not get back to II by press time.

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