Jordan caught in billionaire inferno
NBA icon Michael Jordan has found himself in the middle of the GameStop trading inferno that has turned Wall Street on its head this week.
Jordan picked a very bad time to welcome new investors into his majority ownership of NBA franchise the Charlotte Hornets with business partners Gabe Plotkin and Daniel Sundheim - two hedge fund titans - reported to have taken "catastrophic" losses on their short-selling war with Reddit forum investors.
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The war surrounding the GameStop share price between hedge fund managers and Average Joe investors is reported to have wiped out more than $5 billion from established hedge funds.
At the centre of it all is Plotkin and his Melvin Capital fund, which pursued an aggressive short-selling strategy before being caught in the act by individual investors - which had combined forces to drive up GameStop's share price more than 1700 per cent.
Melvin Capital had bet against GameStop by short-selling its shares meaning it stood to gain if the price went down and lose if it went up.
By pushing up the price of companies like GameStop, members of Reddit group WallStreetBets put the "short squeeze" on hedge funds, which saw them lose more than $5 billion.
Melvin Capital admitted defeat yesterday, with boss Plotkin telling CNBC that his fund had closed its position in GameStop on Tuesday - accepting huge losses. It reportedly required a huge bailout to stay afloat.
The saga took another turn on Friday (AEDT) with GameStop shares crumbling by almost half their value on the back of a restriction of purchasing any of the company's shares - temporarily at least giving hedge fund managers some respite from their world of pain.
It has now been reported that the painful losses experienced by Plotkin and Sundheim have dire consequences for Jordan and his future business options.
The 57-year-old is reported to have lost up to $300 million in his net worth in the past 12 months after a disastrous 2019-2020 NBA season for team owners as a result of the COVID-19 pandemic.
Despite that hit, Jordan's net worth remains at $2.1 billion, according to Forbes.
His stake in the Hornets is reported to have risen in value by more than $1 billion in the past 10 years - on the back of improved conditions for team owners and a monster TV deal pumping money back into owners' pockets.
But he's hitting bumpy territory with his new partners after he sold a significant stake in the Hornets to Plotkin and Sundheim, according to basketball site truehoop.com.
The website reports Jordan is rumoured to be considering selling more of his stake in the Hornets to the pair of investors - who had been rumoured to be interested in purchasing the team outright.
All bets are now off.
There is industry speculation Plotkin and Sundheim no longer have the liquidity to contemplate a move to buy share from Jordan and could even be forced to sell some shares in a bid to remain afloat while their hedge funds are in tailspin.
Jordan's future options appear to be closing by the day.
However, after being ranked No. 4 on Forbes' 2019 celebrity rich list with a net worth of $2.4 billion, his Royal Airness doesn't need to be in a rush while his business partners try to keep their heads above water.
Originally published as Jordan caught in billionaire inferno