Melvin Capital Management LP saw its holdings plunge 53% in January according to a report in The Wall Street Journal citing people familiar with the firm.

The hedge fund had taken on a series of large short positions, most notably in GameStop Corp. stock, which has soared in recent weeks driven by activity touting the stock on Reddit's WallStreetBets forum.

The surging stock and trading frenzy prompted certain retail brokers to restrict trading of the stock and has prompted reviews by the U.S. Securities and Exchange Commission.

The Wall Street Journal reported that the fund started the year with about $12.5 billion and that it now runs about $8 billion, inclusive of a $2.75 billion injection from Citadell LLC, its partners and Point72 Asset Management LP. The paper's sources said the hedge fund has significantly de-risked its portfolio in reaction to the activity.

Melvin Capital had been one of the best-performing hedge funds in recent years until the most recent activity.