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Dow Jones Jumps As House Clears Way For Stimulus; GME Stock Crashes Another 27%| Investor’s Business Daily

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The Dow Jones Industrial Average rallied more than 275 points Thursday, as the House cleared the way for the nearly $2 trillion stimulus bill. Apple stock advanced on Apple car buzz. PayPal surged on strong earnings, while Qorvo and Qualcomm dived. GME stock dived another 27%.




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Among the Dow Jones leaders, Apple (AAPL) was up over 1%, while Microsoft (MSFT) fell 0.4% in today’s stock market. Nike (NKE) is approaching a new buy point amid this week’s bullish move.

Tesla (TSLA) threatened to extend Wednesday’s over-2% drop, falling more than 1% in morning trade. Tesla stock is near a new high.

Chip leaders Qorvo (QRVO) and Qualcomm (QCOM) dived on earnings results, while PayPal (PYPL) jumped to all-time highs in Thursday trade.

Among top stocks in or near buy zones, Farfetch (FTCH), Palo Alto Networks (PANW) and ServiceNow (NOW) are in buy range after recent breakouts.

Short-squeeze target GameStop (GME) tumbled as much as 27% in morning trade, while AMC Entertainment (AMC) slid 8%.

Apple, Microsoft, PayPal and Tesla are IBD Leaderboard stocks. ServiceNow was featured in this week’s Stocks Near A Buy Zone.

Dow Jones Today: Stimulus Update

On Thursday, the Dow Jones Industrial Average traded up 0.9%, while the S&P 500 moved up 0.6%. The tech-heavy Nasdaq composite rallied 0.4% in midday trade.

Late Wednesday, the House voted to clear the way for party-line approval of President Joe Biden’s $1.9 trillion stimulus package. The 218-to-212 nearly party-line vote passed a budget bill that would allow the Senate to pass the relief package with a simple majority.

Among exchange traded funds, Innovator IBD 50 (FFTY) traded up 1% Thursday. Nasdaq 100 tracker Invesco QQQ Trust ETF (QQQ) rose 0.2%. Meanwhile, the SPDR S&P 500 ETF (SPY) moved up 0.6%.

The 100 Best Stocks Of 2020

Stock Market Pulls Back, Finds Support

Looking back at the current uptrend, November was a key month for the stock market. IBD’s The Big Picture flagged the new uptrend following the market’s bullish follow-through day on Nov. 4. Meanwhile, the start of February has the Dow Jones Industrial Average, Nasdaq and S&P 500 finding support near key levels during the current pullback.

Wednesday’s Big Picture commented, “After two straight bullish gains for the S&P 500 and Nasdaq composite, it wouldn’t have been surprising to see some profit-taking Wednesday. That turned out to be the case, as sellers came into the stock market during the final hour trading. The main stock indexes closed with minor changes.”

Due to the recent strength, investors can shift back to an offense stance, with an understanding that there are still good reasons for caution. Look for stocks that are breaking out above new buy points, like Palo Alto Networks and ServiceNow.

Focus on stocks that showed strong relative strength during last week’s sell-off. They could be some of the market’s leaders if the indexes are able to continue their rebounds.

Stock Market ETF Strategy And How To Invest

Dow Jones Stocks: Nike

Dow Jones stock Nike is tracing a new flat base with a 148.05 buy point, according to IBD MarketSmith chart analysis. The stock moved up 0.8% Thursday.

Shares of the retailer recently reclaimed their 50-day moving average line, and are about 6% off their 52-week high.

PayPal Earnings

IBD Leaderboard stock PayPal surged 8% after reporting strong Q4 earnings late Wednesday. PayPal earnings climbed 29% to $1.08 an adjusted share, while revenue rose 23% to $6.12 billion.

PayPal stock is extended after a rebound from its 50-day moving average support level.

Stock Market Earnings: Qorvo, Qualcomm

Top chip stocks Qorvo and Qualcomm both tumbled after reporting earnings after the stock market close Wednesday.

Qorvo reported EPS of $3.08 on revenue of $1.09 billion, beating estimates. Shares declined 5%, falling through their 50-day support level. The stock is about 3% below a 171 buy point in an ascending base.

Qualcomm earnings grew 119% to $2.17 a share, as sales jumped 63% to $8.23 billion. Analysts forecast earnings of $2.10 a share on $8.27 billion in revenue.

Qualcomm stock tumbled over 8% in morning trade. Shares are below their key 50-day line, about 8% below a 161.17 flat-base buy point. The stock triggered the 7%-8% loss-cutting sell rule.

Stocks To Watch: Farfetch, Palo Alto, ServiceNow

New IBD Leaderboard stock Farfetch remains in the 5% buy area above a 65.64 buy point in a consolidation pattern. The buy range goes up to 68.92. Shares lost nearly 2% Thursday morning.

According to Leaderboard commentary, “Farfetch is clearing a narrow consolidation after a solid test of the 10-week moving average and is in buy range. “

Cybersecurity leader Palo Alto Networks is in the 5% buy area past a 375.10 buy point in a flat base. The 5% buy zone goes up to 393.86. Shares dropped 0.7% early Thursday and are just above the new entry.

ServiceNow is in the 5% buy zone above a 566.84 buy point in a flat base, according to IBD MarketSmith chart analysis, following Tuesday’s breakout move. Shares moved up 0.1% Thursday morning.

According to IBD Stock Checkup, NOW stock shows a strong 96 out of a perfect 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.

IBD Live: A New Tool For Daily Stock Market Analysis

GME Stock Short Squeeze

The GME stock short squeeze faltered again Thursday morning, as shares tumbled as much as 27%. Through Wednesday’s close, GME stock had crashed 71% this week.

Among other short-squeeze targets, AMC stock slid over 10% in morning trade, and remains about 60% off its recent high.

Tesla Stock

Tesla stock looked to extend Wednesday’s 2.1% fall, falling about 1% Thursday morning. Shares are just 4% away from all-time highs.

The Jan. 8 IBD Stock Of The Day column signaled that Tesla was flashing several signs of a climax top amid a sharply vertical run over the past few weeks. But so far the stock is showing tremendous resilience after hitting record highs last week.

On Jan. 25, Tesla stock hit a record high at 900.40. Shares are about 83% % above a 466 buy point in a cup with handle amid Thursday’s action.

Dow Jones Leaders: Apple, Microsoft

Among the top Dow Jones stocks, Apple rallied over 1% Thursday after reports said the iPhone maker would make an Apple car with South Korea’s Kia. A deal could come Feb. 17 with the electric vehicles launching in 2024, the report added. Initially, Apple and Kia are said to be aiming for 100,000 Apple cars a year.

Shares are again approaching their 138.89 buy point in a cup with handle.

Meanwhile, Microsoft fell 0.4% Thursday morning, easing from all-time highs.

Shares of the software giant broke out past a 228.22 buy point in recent sessions. The stock is extended past the 5% buy zone that goes up to 239.63.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.

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Business

GameStop shares slide below $90 as Reddit rout continues and investors lose billions

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GameStop’s stock price gyrated in early trading on Wednesday, briefly sliding below $90 as shares in the video game retailer continued to lose altitude after a spectacular rally over the last week. The dip suggests that the popular WallStreetBets Reddit stock market discussion board that has helped drive the run-up may be losing its magic to move the market.

The GameStop tumble followed a large reduction in short interest on the stock, which measures how many of the company’s shares have been borrowed to sell. Many had pointed to that previously high level of short interest, and the fact that hedge funds and others betting against the video game retailer had been squeezed, as a reason GameStop’s shares had soared.

GameStop shares were trading at $93.12, up 3%, as of 10:25 a.m. Eastern time. The stock price had been as high as $483 only last Thursday — a plunge of more than 80% in less than a week.

“These things can last longer than people expect, but when they unwind they can unwind pretty fast,” said Ross Mayfield, investment strategist at Baird. “When it’s complete speculation mania and gambling, someone is going to be left holding the bag.”


GameStop, Reddit and the Battle of Wall Stree…

04:22

The drop in GameStop shares, which fell 60% on Tuesday alone, could result in significant losses for some of the individual investors who had ridden the positive stock market suggestions posted on WallStreetBets. The forum has soared in popularity in the past week, swelling to 8 million members. GameStop’s shares hit an all-time high of $483 on Thursday amid social media chants of buy, buy, buy. 

Since then, GameStop’s 81% stock-price dive has erased nearly $29 billion in the company’s stock-market value, which at its height last week was $35 billion. On Tuesday that stock market value, or market capitalization, sank to $6.3 billion.

The share prices of other companies that have gotten boosterish mentions in WallStreetBets have suffered steep drops as well. Shares of movie theater chain AMC Entertainment fell 40% on Tuesday to just under $8 each. That stock had been as high as $20 last week. BlackBerry’s shares, which had climbed to $28 last week, tumbled 21% on Tuesday to $11.50, while Koss slid 43%.

The acting chairwoman of the U.S. Securities and Exchange Commission, Allison Herren Lee, told NPR on Monday that the stock market regulator is looking into different aspects of the sudden rise in GameStop shares, including whether brokers acted appropriately and whether there had been any market manipulation. She also warned against companies trying to raise money by selling shares at prices that seemed to be inflated by social media driven traders and were not sustainable.

CBS MoneyWatch reported on Monday that the moderators of the WallStreetBets discussion board had recently detected a “large amount” of bot activity in the stock-recommendation content being posted to its group.


Robinhood resumes limited trading of GameStop…

15:02

Naked Brand Group, which sells intimate apparel for both men and woman, on Monday announced it had sold more than 29 million shares in a follow-on offering at $1.70 each, raising $50 million for the company. The company, which is based in Auckland, New Zealand, is in the process of closing all of its stores in favor of online sales.

Naked Brand’s shares had traded for as little as 7 cents each as recently as November. In its offering document, filed with the SEC, the company said its stock price had experienced “extreme volatility” in recent weeks. It said the price swings appeared to be driven by social media chatter as well as “short interest” in the company, as well as other factors.

On Tuesday, shares of Naked Brand fell to 91 cents each, a 45% drop from Monday’s offering price. A spokesman for Naked Brand did not return a request from CBS MoneyWatch for comment.

—The Associated Press contributed to this report.

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Business

Alibaba Q3 earnings: Company prepares to face investors as crackdown in China intensifies

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The company is expected to report a 33% jump in revenue for the quarter ended December compared to a year earlier, according to analysts polled by Refinitiv.

But strong revenue might not be enough to soothe concerns from investors, who have been rattled by worries over how hard Chinese authorities might come down on Ma’s tech empire.

Ma, who co-founded Alibaba more than two decades ago, has watched his businesses draw the ire of Beijing in recent months. He’s also been snubbed by state-run media: On Tuesday, the Shanghai Securities Journal praised prominent Chinese business leaders in an article about “entrepreneurial spirit.” While tech entrepreneurs such as Tencent’s (TCEHY) Pony Ma and Huawei’s Ren Zhengfei were mentioned, Ma was not.

Ma built Alibaba into one of China’s most powerful tech titans. It generated nearly $80 billion in revenue for the fiscal year that ended last March, and it has a market capitalization of more than $700 billion, making it one of the world’s most valuable tech companies.

But Beijing has become increasingly concerned about the clout that big, private tech firms have over the financial industry and other sensitive areas, and how entrenched they have become to everyday life in China through digital payments apps and other services.

Last November, shares in Alibaba slid even though the company’s earnings topped estimates, as it reported results just after regulators shelved a highly anticipated IPO from its financial affiliate, Ant Group.

Since then, the landscape has worsened for Alibaba and other Chinese tech firms. President Xi Jinping in December called efforts to strengthen anti-monopoly rules against online platforms one of the most important goals for 2021, according to state news agency Xinhua. And regulators announced an antitrust investigation into Alibaba on Christmas Eve.

Ant Group, meanwhile, has been told to overhaul its online financial business after authorities criticized it for edging out rivals from the market place, harming consumer rights and taking advantage of regulatory loopholes for its own profit.

Yi Gang, the governor of the People’s Bank of China, said last week at a virtual Davos forum that regulator involvement in that company is ongoing.

Ma — who has retired from the company but still remains a figurehead — has largely remained out of sight through all of this. He vanished from public view for months before briefly emerging in a video in January to speak to teachers at a philanthropic event.

The issues facing Alibaba and Ant have dented the former’s share price. Alibaba’s New York-listed shares are down about 17% since a peak in late October, a plunge that has wiped off more than $140 billion from its market capitalization.

Some analysts suspect Alibaba may survive regulatory scrutiny from China relatively intact. Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, said Chinese authorities likely want to be careful “not to kill the goose that lays the golden eggs,” after all.

But experts warn that the days of unchecked growth are probably over.

“It is clear that [Beijing] is going to narrow the scope of managerial independence through regulation and informal ‘guidance’ to the [Alibaba] conglomerate,” said Doug Fuller, an associate professor at the City University of Hong Kong who studies technological development in Asia.

As for Ant Group, the company will likely still be allowed to go ahead with an IPO once regulators are finished grilling the company over anti-monopoly concerns and consumer privacy issues, according to Kevin Kwek, managing director and senior analyst at Alliance Bernstein.

But if it is forced to make any drastic changes, that could hurt Ant’s valuation when it eventually is able to list. Before the IPO was pulled, Ant was expected to become the largest initial public offering ever with a $34 billion share sale.

“You can bet the best minds of Ant [are] working on the challenges as we speak,” Kwek said. “The question is how much they end up ‘giving up’ and what that could mean for valuations.”

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Retail investors turn attention to silver as GameStop shares retreat

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SINGAPORE (Reuters) — A social media-driven buying spree lifted silver to an eight-year high on Monday but the rally cooled on doubts about the ability of retail traders who are normally focused on stocks to move prices in a bigger, more liquid commodities market.

Video game retailer GameStop, at the center of last week’s “Reddit rally,” slid 30.8% to $225, but other shares caught up in the frenzy that has battered short-sellers extended their advance, including BlackBerry.

Silver prices climbed to an eight-year peak of just over $30 an ounce before paring gains to trade up 6.3% at $28.70.

A lot of people who were anticipating a GameStop-like rally in silver “now realize there is not as much buying pressure pushing it up like some had thought,” said Michael Matousek, head trader at U.S. Global Investors.

It was not clear how long the Reddit-fueled rally in stocks shorted by hedge funds would last. It could mean more losses in the wider market this week if funds have to keep selling to meet redemptions or right their portfolios. Longer-term, they may have to shift strategies.

Share prices swung wildly last week when small-time traders, who organised in online forums and traded with fee-free brokers such as the Robinhood online brokerage, saddled several powerful hedge funds with losses on their short positions.

The effect of the struggle on the wider U.S. market abated on Monday, with stocks ending sharply higher after last week’s steep market sell-off. AMC was flat, having risen more than 500% this year. BlackBerry shares were higher in New York and Toronto trading.

The showdown has drawn scrutiny from financial regulators, lawmakers and the White House, concerned about possible market manipulation.

Robinhood Chief Executive Vlad Tenev is expected to testify before a U.S. House of Representatives committee on Feb. 18, Politico reported on Monday, citing people familiar with the matter.

Robinhood raised another $2.4 billion from shareholders just days after existing investors pumped in $1 billion, it said in a blog post. The company, which faced anger last week for curbing the purchase of some stocks, raised trading limits on GameStop, AMC, Koss Corp and Express.

The firm is preparing for an initial public offering but it was not clear if it will push forward with those plans.

Cold water

Traders and analysts poured cold water on the chances of a prolonged rally in silver, saying unlike in GameStop, there is no excessive short positioning and that the options market is fairly well balanced.

Speculative financial investors were already positioned fairly bullishly, dealers said. Net long positions in COMEX Silver futures and options rose to about 44,320 lots as of Jan. 26, data from the U.S. Commodity Futures Trading Commission (CFTC), showed.

“Unlike single stocks, the market for silver is much larger and more complex and therefore more difficult to manipulate,” said Raffi Boyadjian, senior investment analyst at XM, in a note.

Traders were growing concerned that the Reddit effect could extend to less liquid commodities markets. However, traders said exchange-traded funds that focus on commodities were more likely to be targets.

The iShares Silver Trust ETF, the largest silver-backed ETF, jumped 7.1% on Monday. Data showed its holdings rose by a record 37 million shares from Thursday to Friday alone, each representing an ounce of silver.

Mining behemoths BHP Group, Glencore and Anglo American were the top six gainers on the FTSE 100 in London. Miner Fresnillo rose 8.95%, and U.S. small-cap miners Hecla Mining and Coeur Mining surged 28.3% and 23.1%, respectively.

Natural gas rose about 10% on Monday, in part due to expectations for colder weather, though such moves are not out of the norm for that market.

Retail investors on the popular Reddit online forum WallStreetBets expressed concerns on Monday that bets on silver were undercutting their focus.

“By buying silver … you would be directly putting money into the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $GME,” wrote one user who urged investors to continue to buy GameStop. “It will put you on the sidelines from this righteous and glorious war we are in.”

Shorting shares of GameStop cost hedge funds a total $12.5 billion over January, data from financial analytics firm Ortex showed on Monday.

Photo: Reuters

Hurting short-sellers

The silver furor began on Thursday after posts on WallStreetBets urged investors to buy physical silver.

“Get out there and buy at least 4 ounces of silver as soon as you can,” one forum participant posted.

Retail traders poured a record A$40 million ($30.6 million) into Australian ETF Securities’ Physical Silver fund by the afternoon. A silver ETF in Japan surged 11%.

Global short interest in silver, or the cumulative value of bets it falls in price, is equivalent to about 900 million ounces, just short of annual global production.

Banks and brokers hold most of that but it is not clear whether they are net short on the metal or whether their bets offset very big physical holdings.

JPMorgan analysts said fundamentals did not justify a sustained decoupling of silver from gold. Gold prices rose less than 1% on Monday.

(Reporting by Tom Westbrook and Thyagaraju Adinarayan in London and Jeff Lewis in Toronto; Additional reporting by Gavin Maguire in Singapore, Luoyan Liu in Shanghai and Abhinav Ramnarayan, Sujata Rao and Karin Strohecker in London, Lewis Krauskopf, Devika Krishna Kumar and Marcelo Teixeira in New York; Writing by Sonya Hepinstall; Editing by Jan Harvey and Matthew Lewis)

© Copyright Thomson Reuters 2021

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Business

Robinhood raised $1 billion from investors to handle trading surge: NYT

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  • Robinhood raised $1 billion from existing investors this week.
  • The trading platform is struggling with a surge in trading of some stocks, including GameStop.
  • Earlier Thursday, the firm also borrowed “several hundred million dollars” from banks.
  • Visit Business Insider’s homepage for more stories.

Robinhood raised $1 billion from its existing investors this week, The New York Times reported.

The firm is struggling to handle a surge in trading on the platform involving a number of stocks that have been the target of short squeezes, driven largely by the WallStreetBets Reddit forum, a group of retail traders that helped drive up the share prices of GameStop and AMC Theaters, among others.

Robinhood CEO Vlad Tenev said Thursday that the company did not have liquidity issues, after Bloomberg reported that the firm had borrowed “at least several hundred million dollars” from banks amid the trading chaos.

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital’s short positions

The trading platform also temporarily stopped purchases of certain stocks, sparking outrage from lawmakers and business leaders.

In an email sent to Robinhood users on Thursday, the company said limited purchases of those stocks would be allowed on Friday, but that it would continue to “monitor the situation and may make adjustments as needed.” 

“To be clear, the decision was not made on the direction of any market maker we route to or other market participants,” the statement continued. 

Robinhood was still in need of more cash to avoid implementing further trading restrictions, two sources told The Times.

The privately-held company’s investors include venture capital firms Sequoia Capital and Rabbit Capital, both of which provided additional funding Thursday, The Times reported.

“This is a strong sign of confidence from investors that will help us continue to further serve our customers,” a spokesperson for Robinhood, told The Times.

On Thursday a dozen House Republicans sent a letter to the head of the Securities and Exchange Commission calling on it to investigate possible collusion between Robinhood and any hedge funds. 

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Business

Robinhood, in Need of Cash, Raises $1 Billion From Its Investors

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Facing an onslaught of demands on its cash amid a stock market frenzy, Robinhood, the online trading app, said on Thursday that it was raising an infusion of more than $1 billion from its existing investors.

Robinhood, one of the largest online brokerages, has grappled with an extraordinarily high volume of trading this week as individual investors have piled into stocks like GameStop. That activity has put a strain on Robinhood, which has to pay customers who are owed money from trades while posting additional cash to its clearing facility to insulate its trading partners from potential losses.

On Thursday, Robinhood was forced to stop customers from buying a number of stocks like GameStop that were heavily traded this week. To continue operating, it drew on a line of credit from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation.

Robinhood still needed more cash quickly to ensure that it didn’t have to place further limits on customer trading, said two people briefed on the situation who insisted on remaining anonymous because the negotiations were confidential.

Robinhood, which is privately held, contacted several of its investors, including the venture capital firms Sequoia Capital and Ribbit Capital, who came together on Thursday night to offer the emergency funding, five people involved in the negotiations said.

“This is a strong sign of confidence from investors that will help us continue to further serve our customers,” Josh Drobnyk, a Robinhood spokesman, said in an email. Sequoia and Ribbit declined to comment.

Investors who provide new financing to Robinhood will receive additional equity in the company. The investors will get that equity at a discounted valuation tied to the price of Robinhood shares when the company goes public, said two of the people. Robinhood plans to hold an initial public offering later this year, two people briefed on the plans said.

Robinhood’s emergency fund-raising is the latest sign of how trading in the stock market has been upended this week.

An online army of investors, who have been on a mission to challenge the dominance of Wall Street, rapidly bid up the price of stocks like GameStop, entrapping the big-money hedge funds that had bet against the stocks. Some of these individual investors have reaped huge profits, while at least one major hedge fund had to be bailed out after facing huge losses.

Robinhood, which is based in Silicon Valley, has been key to empowering the online investors. Adoption of the app has soared in the pandemic as the stock market surged and people took up day trading in the void of other pastimes. The company has drawn in millions of young investors who have never traded before by offering no-fee trading and an app that critics have said makes buying stocks feel like an online game.

Without fees, Robinhood makes money by passing its customer trades along to bigger brokerage firms, like Citadel, who pay Robinhood for the chance to fulfill its customer stock orders.

In May, Robinhood said it had 13 million users. This week, it became the most-downloaded free app in Apple’s App Store, according to Apptopia, a data provider.

Critics have accused the company of encouraging people to gamble on stock market movements and risk big losses. Brokerages including T. Rowe Price, Schwab and Fidelity have imitated Robinhood by lowering their trading fees to zero. Many of them were also hit by the crush of trading this week.

Robinhood has had no trouble raising money over the last year, drawing $1.3 billion in venture capital backing and boosting its valuation to nearly $12 billion. Its other investors include the venture capital firm DST Capital, New Enterprise Associates, Index Ventures and Andreessen Horowitz.

Yet the company has faced many issues, including fines from regulators for misleading customers. Last March, it raised more money after its app went down and left customers stranded and nursing big losses, leading to a still ongoing lawsuit.

In recent weeks, many online investors have used Robinhood to make bets that pushed up the price of GameStop, AMC Entertainment and other stocks that had been widely shorted — or bet against — by hedge funds. That changed on Thursday after the company curbed customer trading in the most popular stocks.

“As a brokerage firm, we have many financial requirements,” Robinhood said in a blog post Thursday. “Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.”

In protest, hundreds of thousands of users joined a campaign to give Robinhood’s app the lowest one-star review and drive the company’s rating down. Some investors also sued Robinhood for the losses they sustained after the company cut off trading in certain stocks and several lawmakers urged regulators to exercise more scrutiny of the company.

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Business

GameStop short-seller down 30% this year gets $2.8 billion bailout from the firms of billionaire investors Steve Cohen and Ken Griffin

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Billionaire investor Steve Cohen.

Steve Marcus/Reuters

  • Steve Cohen’s Point72 and Ken Griffin’s Citadel are investing $2.75 billion in Melvin Capital.
  • Melvin is down about 30% this year as its short positions are getting hammered.
  • Day traders have bid up the stock prices of GameStop, Bed Bath & Beyond, and other popular shorts.
  • Visit Business Insider’s homepage for more stories.

A pair of billionaire investors are swooping in to support a short-selling hedge fund in its battle against an army of irreverent day traders.

Steve Cohen’s Point 72, Ken Griffin’s Citadel, and other partners are plowing a total of $2.75 billion into Melvin Capital, the hedge funds said on Monday. They will receive non-controlling revenue shares in Melvin in return for their money.

Melvin will welcome the cash injection as painful short bets have left it down 30% year-to-date as of Friday, The Wall Street Journal reported.

Scores of retail investors, including some members of Reddit forum r/wallstreetbets, have targeted heavily shorted stocks in recent weeks. They drove GameStop’s stock price up as much as 145% on Monday, Bed Bath & Beyond up 58%, BlackBerry up 48%, and AMC up 39%.

Melvin takes more negative positions than most of its Wall Street rivals, exposing it to potentially heavy losses. It owned “puts” – bets that a stock price will fall – on 17 US-listed companies including GameStop and Bed Bath & Beyond at the end of September.

The firm’s strategy has paid off in the past. Melvin has returned an average of 30% annually since its founding in 2014, and had grown its assets under management to $12.5 billion at the start of this year, The Journal said.

Gabe Plotkin, a former star portfolio manager at Cohen’s SAC Capital, quit to start Melvin in 2014. He counted Cohen as a day-one backer.

Read more: GOLDMAN SACHS: These 22 stocks still haven’t recovered to pre-pandemic levels – and are set to explode amid higher earnings in 2021 as the economy recovers

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