A viral story regarding Michael Jordan pops up every so often. Whenever it does, we get an email or direct message from someone saying something like, "Check this out. You should probably update Michael Jordan's net worth, he's broke."
As the story goes, Michael Jordan lost so much money shorting GameStop stock back during meme stock mania in early 2021 that he found himself $500 million in debt and was forced to sell the Charlotte Bobcats NBA team to a hedge fund that held his debt. Another version claims Michael simply lost $500 million on his short bet, not that he was $500 million in debt. Either way, the story claims that when Michael sold the Bobcats TWO AND A HALF YEARS LATER for $3 billion… he did it because he had to. It was his only way out of debt.
If you search YouTube or TikTok for "Michael Jordan GameStop," you will find hundreds of videos of people telling this story as if it is 100% pure, verifiable fact. Spoiler alert: It is not 100% pure fact. It's 100% pure viral nonsense bullshit based on the dumbest thing ever…
This story popped up again today. I think I've isolated the source to a YouTube account called "Soysaucesports." A few people sent me the link. In the video, one of the hosts confidently (and I would say defamatorily) claims that Michael "lost so much bread by shorting GameStop that he had to sell the Charlotte Hornets… to his "bookie." Who was MJ's bookie? According to Soysaucesports, the "bookie" was Gabe Plotkin, founder of Melvin Captial.
We'll come back to the Michael + Gabe + Melvin connection in a moment…
(Photo by Logan Riely/Getty Images)
Let's go back to early 2021 for a second.
The insane ups and downs of GameStop's share price back in 2021 were caused by a "short squeeze" perpetuated by a group of investors from Reddit's "Wall Street Bets" subreddit. These investors were angry at all the hedge funds that were using short positions to bet against companies like GameStop, AMC, and Blackberry. Melvin Capital was the number one target of these redditers because it had a particularly large short bet against GameStop.
Enough of these angry amateurs bought shares in GameStop to send the stock price soaring. When that happened, Melvin's short position against GameStop quickly became toxic. On January 31, 2021, it was reported that the sharp rise in GameStop's stock price had caused Melvin Capital's investments to lose 53% of their value over a matter of days. A few weeks before the madness, Melvin managed $12 billion worth of assets. Its assets reportedly dropped to around $6 billion before receiving a $2 billion lifeline from two friendly hedge funds.
Obliterating 50% of Melvin's assets was seen as a huge victory by the redditors, but the celebration may have been short-lived. Just a few weeks later, Melvin's assets apparently rose by 22%. Melvin ended 2021 down 39% overall. A lot of people on reddit seem to believe they put Melvin out of business.
In reality, from what I can see, Melvin's assets under management fell to around $7.8 billion (from a high of $12.5 billion) before they decided to shut the fund down and move on with their lives. Not a fun outcome, but not exactly declaring bankruptcy.
How Does this Connect to Michael Jordan?
Michael first invested in the Charlotte NBA franchise in 2006. In 2010, Michael bought out the former majority owner to take control of 80% of the team. He increased his stake to 90% in 2014. All-in, Michael invested around $300 million to buy 90% of the Bobcats.
In 2019, Michael sold a minority stake in the Bobcats at a $1.5 billion valuation. One of the buyers in this transaction was… Gabe Plotkin. Founder of Melvin Capital. In June 2023, Michael sold a majority stake in the Bobcats at a $3 billion valuation. One of the buyers in this transaction was… Gabe Plotkin.
Duh, of course, Michael had to sell the Bobcats to his hedge fund manager to cover his debts. It's the only logical conclusion. Did he sell the team right after GameStop? No, he waited two and a half years. Because that's how debts to bookies work.
This claim about Michael being forced to sell the Hornets to cover a $500 million debt first popped up in October 2021. At the time, I did a deep dive to understand what was going on. It took me about two minutes to trace the source to an extremely low-credibility Twitter account that I'm purposely not mentioning or linking to here.
The account claimed that because Michael sold a piece of the Bobcats to Gabe Plotkin two years earlier, it obviously meant he was an investor with Melvin Capital. And since he was definitely a Melvin Capital investor, he was definitely short GameStop. And therefore he definitely lost $500 million. This claim was gleefully repeated on a thousand crappy websites by a thousand commenters in the Wall Street Bets subreddit.
I couldn't find a single credible source that showed Michael had a short bet against GameStop or that he was Melvin Capital investor. Even if he was a Melvin Capital investor, to lose $500 million from the firm's GameStop problems would imply that Jordan had $1 billion invested with the firm and that the $1 billion was ENTIRELY INVESTED IN A SINGLE SHORT BET AGAINST GAMESTOP. Laughable.
Want to know where the $500 million number came from?
The Twitter account and all the subsequent slop websites that repeated the claim pinpoint their $500 million loss theory to the fact that in April 2020 (before GameStop mania), Forbes pegged Michael's net worth at $2.1 billion. In April 2021, Forbes updated its number for MJ to $1.6 billion without explaining the difference. That's it. Maybe Forbes just adjusted its number? FYI, Forbes and CelebrityNetWorth both peg MJ's net worth at around $3.6 billion today.
To put this all together. The people repeating this claim believe that in early 2021, Michael had a $1 billion short bet against GameStop through Melvin Capital. And that bet turned into a $500 million loss. That loss put Michael in a very difficult financial position with his "bookie," hedge fund Melvin Capital. To make things right, Michael took a time machine back two years and allowed Melvin founder Gabe Plotkin to buy a minority stake in the Bobcats. Michael then waited two and a half more years and was forced UNDER A GUN to sell the Bobcats to Gabe… for $3 billion.
So, to summarize:
- Did Michael Jordan lose $500 million on GameStop? Nope.
- Was he forced to sell the Hornets to cover debts? Not even close.
- Was the sale of the Hornets a business move that made him even richer? Absolutely.
The reality is that Michael Jordan remains a multi-billionaire. Selling the Hornets was his best financial move ever. And he probably never had a single dollar bet against GameStop. Speaking of Michael Jordan… We recently launched a newsletter called Deep Pockets. Once a week, I tell the story of how some massive fortune was made. One of my recent stories was all about Michael Jordan's staggeringly successful Nike deal. A deal Michael absolutely 100% did NOT want to sign. Subscribe by entering your email in the form below!
0 Comments