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Failed GameStop (GME) short position leads White Square Capital hedge fund to shut down

A Hedge Fund that banked on GameStop's (GME) failure is closing its doors.
Donovan Erskine
Donovan Erskine
6

One year ago, you probably would’ve been a bit shocked if anybody told you that they were going all in on GameStop (GME) stock, buying up as many shares as they could. In fact, you may have even agreed that it was a wise idea to short GameStop (GME), as there was little reason to predict an increase in the stock’s value any time soon. Many hedge funds put a lot of money into betting against GameStop, and those decisions are coming back with ultimate consequences. White Square Capital, a hedge fund that was shorting GameStop (GME), is set to shut down.

The Financial Times reported today that White Square Capital, a London-based hedge fund, will be closing down its business later this month. Reportedly, investors were informed of the decision via letter. The decision comes after a review of White Square Capital’s business model. Investors will have their capital returned to them before doors officially close at the hedge fund.

A key part of that “business model” that got a second look before the company decided to close down was its decision to short GameStop’s stock. For those unfamiliar, “shorting” is when an investor or investment group bets against a stock increasing in value. This decision of course caused massive troubles when GameStop (GME) exploded in popularity earlier this year. While many of the hedge funds that were short GME held their ground, the stock persisted, maintaining a high value for months and months. The financial pressure proved to be too much for White Square Capital.

With how many investors were banking on GameStop’s (GME) continued failure, White Square Capital likely won’t be the final hedge fund to close its doors over the situation. For more on GameStop (GME) and the wildly unpredictable stock market, Shacknews is your place.

News Editor
News Editor

Donovan is a young journalist from Maryland, who likes to game. His oldest gaming memory is playing Pajama Sam on his mom's desktop during weekends. Pokémon Emerald, Halo 2, and the original Star Wars Battlefront 2 were some of the most influential titles in awakening his love for video games. After interning for Shacknews throughout college, Donovan graduated from Bowie State University in 2020 with a major in broadcast journalism and joined the team full-time. He is a huge Scream nerd and film fanatic that will talk with you about movies and games all day. You can follow him on twitter @Donimals_

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