Did Michael Jordan’s net worth lose $ 500 million because of GameStop?

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Remember January when the whole world was basically obsessed with the hourly fluctuations in GameStop’s stock price? If somehow you have no idea what I’m talking about, I’ll give you a quick background story in a moment.

I mention GameStop today to address a story that continues to show up in our email submissions. It seems to a lot of people that Michael Jordan’s net worth fell by $ 500 million as a direct result of the GameStop mania. Is there anything wrong with this rumor?

A very brief backstory on GameStop Mania

In late January, GameStop’s share price was absolutely ballistic. After the stock price hadn’t risen above about $ 20 per share for most of a year prior to January, the stock price soared to $ 350 at various points in time. A day later it would cut in half. Then it went back to $ 325. Then back down 50 dollars. Then secure yourself around $ 150.

GameStop – a company that loses money every year by borrowing video games in shopping malls – currently has a market cap of $ 13.5 billion thanks to its recent stock price of $ 176.

The insane stock volatility has created some incredible stories for individual investors.

You may have read our story about Ryan Cohen, the investor who bought 9 million shares of GameStop at an average price of $ 8 before the mania broke out. At the height of the GameStop mania, Cohen’s $ 72 million investment was worth just over $ 4 billion.

GameStop’s CEO – who had been in office for about two years – resigned in April 2021. When he took the job, he received the equivalent of $ 23 million in stocks. These stocks were briefly worth over $ 1 billion at the height of the GameStop mania. On the day he quit, his shares were worth around $ 180 million.

The biggest winners, however, were a group of mostly anonymous investors in a subreddit.

Melvin capital

According to most reports, the insane ups and downs in GameStop’s stock price were caused by a “short squeeze” immortalized by a group of investors from Reddit’s “Wall Street Bets” subreddit.

These investors were enraged by all of the hedge funds using short positions – betting on a company’s stock prices falling – against companies like GameStop and AMC and Blackberry. The Redditors directed their anger primarily at a hedge fund called Melvin Capital, which had a big short bet against GameStop … the most short-selling company on the New York Stock Exchange.

Enough of these disgruntled amateurs bought GameStop stock to drive the stock price higher. When that happened, Melvin’s short position against GameStop quickly became toxic. On Jan. 31, it was reported that the sharp surge in GameStop’s share price caused Melvin Capital’s investments to lose 53% of their value in a matter of days. A few weeks earlier, Melvin was managing $ 12 billion in assets. Its net worth reportedly fell to around $ 6 billion before receiving a $ 2 billion lifeline from two befriended hedge funds.

The eradication of 50% of Melvin’s fortune was viewed as a huge victory by the Redditors.

The celebration may have been short-lived. Just weeks later, Melvin’s assets appear to have increased 22%. It’s unclear where Melvin’s fortune currently sits. None of these numbers have been officially confirmed, and since Melvin is a private hedge fund, we may never know what actually happened.

Michael Jordan wealth

(Photo by FRANCK FIFE / AFP via Getty Images)

Michael Jordan

What does all of this have to do with Michael Jordan?

In 2006 Michael Jordan bought a minority stake in the NBA’s Charlotte Bobcats. In 2010, Michael paid $ 175 million to take over the controlling stake from BET founder Robert Johnson. With this transaction, Michael owned 80% of the team. By 2014, Michael had increased his investment share to just under 90% with transactions valued at $ 500 million for the franchise.

In 2019 Michael sold a minority stake in what is now Charlotte Hornets for $ 1.5 billion to two hedge fund managers. One of those hedge fund managers is called Gabe Plotkin.

Gabe is the founder of Melvin Capital.

Did Michael lose $ 500 million because of GameStop?

The short answer is … probably not.

Here is the longer explanation:

After claiming Michael lost $ 500 million because of GameStop, all of the articles set their conclusion that Forbes pegged Michael’s net worth at $ 2.1 billion in April 2020 (well before the GameStop mania). In April 2021, Forbes updated its number for MJ to $ 1.6 billion without any explanation.

I can’t find a single credible source showing that Michael lost a dime from GameStop or is even a Melvin Capital investor. Even if he were a Melvin investor, a “$ 500 million loss” from Melvin’s troubles would mean Jordan had invested $ 1 billion in the company. The bulk of Jordan’s net worth is the Hornets’ worth, and even if he had $ 1 billion in cash, he wouldn’t put it all into a fund.

Personally, I think the explanation for reducing Forbes is a lot simpler. Forbes, like CelebrityNetWorth, assumed that the Hornets were worth well over $ 1.5 billion when calculating Michael’s fortune. After all, the Clippers were sold for $ 2 billion in 2014.

We now realize that the hornets are actually worth much less. Maybe even less than the $ 1.5 billion valuation when Gabe became an investor in 2019.

Think what COVID did to the NBA teams. In 2020, NBA teams lost all tickets, goods, and other revenue. They also played fewer games, which likely meant a decrease in TV license income. Even before COVID, the Hornets were a money-losing franchise. COVID likely soaked the team’s books in red ink.

Until there is a credible source claiming Michael Jordan is a Melvin investor, or until Forbes explains why they decided to reduce his net worth, I consider this to be a false rumor.

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