Billionaire tech investor Chamath Palihapitiya told CNBC on Wednesday that he closed his position at GameStop the day after entering the video game retailer’s frenzy.
He also defended the power of individual investors to compete with Wall Street hedge funds.
The Social Capital CEO and former Facebook executive tweeted Tuesday that he bought $ 125,000 worth of GameStop calling options in February after asking his followers on Twitter what to buy. Calls are derivatives that give the buyer the right to buy a share at a set price. The trader makes money when the stock rises above the strike price. GameStop stock opened Wednesday at $ 354 per share, up more than 1,550% this year alone.
In CNBC’s Fast Money: Halftime Report on Wednesday, Palihapitiya said, “I closed my position this morning and wanted to announce that I will take all the profits I made plus my original position – I’m going to take $ 500,000 and I’ll donate it. “
Palihapitiya dismissed Wall Street criticism of how individual investors are banding together on social media, especially wallstreetbets’ Reddit forum, and it’s hypocritical to ditch GameStop and a handful of other stocks like pros.
He said it could be considered irresponsible to sell 140% of GameStop’s stock to hedge funds.
GameStop’s shares rose earlier this month after the company announced that Chewy co-founder Ryan Cohen was joining its board of directors. As buyers plowed into the stock, shorts were sent to the mountains.
A short squeeze occurs when a stock starts rising in price with a large block of short sellers, and short positions attempt to buy stocks at the currently higher prices to limit their losses. You return the number of shares borrowed and lose the price difference.
Palihapitiya said the phenomenon around GameStop stocks, some other stocks like AMC Entertainment, was much more than just a trading story, arguing it was an establishment push back.