Courtesy of Pam Martens
Jamie Dimon, Chairman and CEO of JPMorgan Chase
According to JPMorgan Chase’s 13F filings with the Securities and Exchange Commission, it moved from a net short position in GameStop shares as of December 31, 2019 to a big long position as of September 30, 2020, the date of its last 13F filing. As of the end of the third quarter of last year, JPMorgan Chase was long (owned) 368,196 shares of GameStop versus a put (short position) on a meager 19,300 shares.
At the close of trading on September 30, 2020, GameStop was a $10.20 stock, making JPMorgan’s long position worth $3.8 million. At the intraday high yesterday, GameStop was a $483 stock. If JPMorgan had sold at the top, it would have made approximately $174 million on its long position versus where it was trading four months earlier.
We’re dismissing what happened to the put that JPMorgan held on 19,300 shares of GameStop for this reason: JPMorgan Chase just happens to be one of Melvin Capital’s Prime Brokers, the hedge fund making news because it was bleeding badly from its short position in GameStop. Melvin Capital’s other Prime Brokers include Goldman Sachs, Morgan Stanley and National Financial Services, according to Melvin Capital’s Form ADV filing with the SEC. A Prime Broker typically provides hedge funds with one or more of the following services: trade financing, securities lending so hedge funds can take short positions, trade executions, and serving as custodian of securities.
JPMorgan is not just the Prime Broker to Melvin Capital. It services a large number of other hedge funds. That gives JPMorgan the ability to see which way trades are moving. One can assume that when JPMorgan saw its hedge fund clients closing out their short positions on GameStop in a panic, it exited its own put position before yesterday. It may have even purchased more shares of GameStop as it saw the runup in the share price occurring and had an insider’s view of exactly how short its own hedge fund customers were and how much more stock they had to buy to fully close out their positions.
The mainstream media narrative is that a bunch of amateur traders on a Reddit message board, r/WallStreetBets, wanted to take down evil hedge funds, like Melvin Capital, that were shorting the stock of GameStop (making bets it would decline in price) so these egalitarian activists set out to pump up the stock price.
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