Michael Jordan paid $275 million for a majority stake in the Charlotte Hornets in 2010. Now the NBA legend, according to ESPN, is in talks to sell the stake to a consortium led by Gabe Plotkin and Rick Schnall, minority owners of the Hornets and Atlanta. Hawks, respectively.
Plotkin may sound familiar fortune readers in other contexts. The hedge fund billionaire was at the center of the GameStop saga at the height of the meme-stock frenzy during the pandemic.
In 2021, retail traders communicating on online forums like Reddit, especially the r/WallStreetBets page, combined to increase GameStop’s stock, often trading on Robinhood’s commission-free brokerage platform. Melvin Capital Plotkin Management has shorted, or bet against, video game retailers. An army of traders also bought other stocks that hedge funds had shorted.
In January 2021 alone, Melvin Capital lost about $6.8 billion, suffering one of the fastest declines for hedge funds since the financial crisis of 2008. Fellow hedge funds Point72 and Citadel made cash investments in Melvin Capital during the so-called short squeeze, but more than a year later attract that investment. Melvin Capital has finally announced that the fund will close in June 2022.
The saga led to a House committee hearing in February 2021, with many lawmakers worried about the ability of social media chatter to cause real problems.
It also shows how powerful retail investors have become.
Plotkin, who has become a superstar in the world of hedge funds — delivering returns of around 30% per year for six years with the help of bearish bets — resigned from managing external capital and wrote to investors: “I’m sorry. In hindsight and despite our intentions, now we know that we focus on future returns and team continuity without considering the loss of your investment.
Citadel CEO Ken Griffin later criticized the meme stock traders pulled from the mammoth short squeeze.
“You feel good about this?” he asked at an event hosted by Bloomberg Intelligence in New York last year. “It’s Gabe’s money that you took away. You are spending pension money that belongs to teachers.”
In 2020, before the GameStop trade saga, Jordan sold a significant minority stake in the Hornets to Plotkin and D1 Capital CEO Daniel Sundheim. (According to ESPN, Sundheim is part of a consortium looking to buy the team.)
The Hornets have never won an NBA championship and currently have a record of 22-49. They are valued at $ 1.7 billion by Forbes in October, it ranked only No. 27 among the league’s 30 teams in terms of value. The Golden State Warriors took the top spot at $7 billion.
Jordan, a six-time NBA champion, will retain a minority stake if the deal is completed, according to ESPN.