Billionaire tech investor Chamath Palihapitiya told CNBC on Wednesday that he closed his position in GameStop, one day after joining the trading frenzy surrounding the video game retailer.
He also defends the power of individual investors to compete with Wall Street hedge funds.
Social Capital CEO and former Facebook CEO tweeted on Tuesday that he bought $ 125,000 for $ 115,000 GameStop call options after asking his followers on Twitter what to buy. Calls are derivatives that give the buyer the right to buy a share at a fixed price. The trader earns money if the stock rises above the strike price. GameStop shares opened at $ 354 a share on Wednesday, just over 1,550% this year.
On CNBC’s ‘Fast Money: Halftime Report’ on Wednesday, Palihapitiya said: “I closed my position this morning and I wanted to announce that I’m taking all the profits I made plus my original position – I’m going to take $ 500,000 and I will donate it. ‘
Palihapitiya has criticized Wall Street over how individual investors work together on social media, especially the Wallstreetbets Reddit message board, and the short-lived GameStop and a handful of other stocks like pros are hypocritical.
He said the allocation of hedge funds to 140% of GameStop shares could fall short as irresponsible.
Shares of GameStop initially jumped earlier this month after the company said Chewy co-founder Ryan Cohen had joined the board. While buyers plowed into the stock, shorts were run to the hills.
A short pressure occurs when a stock with a large number of short sellers starts to rise in price, and a pair of shorts scrambles to buy shares at the current higher prices to limit their losses. They return the number of shares borrowed and lose the price difference.
Palihapitiya said the phenomenon surrounding GameStop shares, a few other shares such as AMC Entertainment, is much more than just a trading story, arguing that it is pushing the establishment back.