• A hedge fund that took a short position against GameStop has revealed plans to shut down its operations.
• White Square Capital, based in London, which had over $400 million worth of assets under its management, suffered double-digit percentage losses as a result of the short-squeeze.
• Analysts have asserted that the closure of the fund has little to do with the GameStop saga.
• On the other hand, GameStop has gone on to announce the completion of an ATM equity offering worth over $1.3 billion.

The GameStop saga, which pitted institutional investors and retail traders against one another, was one of the most sensational financial events of the first quarter of 2021. The saga continues as one of the hedge funds that betted heavily against GameStop has revealed that it will be shutting down operations and refunding investors back their capital. 

The firm, White Square Capital, was one of the hardest-hit funds as it recorded huge losses. This stands in stark contrast to recent developments from GameStop in announcing the completion of a $1.3 billion equity offering.

The Fall of White Square Capital

UK-based hedge fund White Square Capital has revealed plans to shut its doors, following a series of setbacks. The fund was among those that bet against GameStop in the widely publicized GameStop saga.

In the wake of the saga, White Square Capital recorded losses of double-digit percentages, but an inquiry by the Financial Times revealed that the decision to close the firm was not related to the losses incurred by the short-squeeze. 

The firm’s co-founder, Kronawitter, indicated that the opportunities for arbitrage have been significantly reduced because of an “oversupply of capital.”

The executive went on to state that ease of information regarding access and investment alternatives cast a shadow of doubt on the justifiability of management fees. At its height, White Square Capital had over $400 million worth of assets in its management.

GameStop’s Streak Continues

GameStop reached a historic milestone after the news that it had completed an equity offering that generated over $1 billion.  The announcement by the company disclosed that the proceeds from the offering will be deployed in a series of “growth initiatives and to maintain a strong balance sheet.”

One rumoured growth initiative that could profit from the conclusion of the equity offering is the GameStop NFT marketplace. The NFT marketplace will be launched on Ethereum and, according to details gleaned from sources, it appears that it will utilize the ERC721 standard.

On the Flipside

• GameStop (NYSE: GME) fell by over 25% in the face of increasing sales.
• The first quarter of 2021 saw a marked increase in sales by a whopping 25.1% and a reduction in operating losses.

The GameStop Saga

The GameStop saga, which grabbed the spotlight early this year, unveiled a sensational battle between hedge funds and retail traders. It was often dubbed the David vs Goliath battle as institutional investors and hedge funds decided to short GameStop. 

Traders on r/wallstreetbets banded together to purchase GameStop stock, effectively creating a short squeeze, pitting the two classes of investors against each other.

This move led to massive losses for the hedge funds as several of them closed their positions. Collectively, the GameStop saga cost hedge funds over $5 billion.