Billionaire technology investor Chamath Palihapitiya told CNBC on Wednesday that he ended his position at GameStop, a day after entering the commercial frenzy surrounding the video game retailer.
He also defended the power of individual investors to compete with Wall Street hedge funds.
Social Capital’s CEO and former Facebook executive tweeted on Tuesday that he bought $ 125,000 in $ 115 call options in February after asking his Twitter followers 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 shares opened on Wednesday at $ 354 per share, up more than 1,550% this year alone.
In CNBC’s “Fast Money: Break Report” on Wednesday, Palihapitiya said, “I ended up closing my position this morning and wanted to announce that I’m taking all the profits I made from my original position – I’m going to take $ 500,000 and I’m going to donate . “
Palihapitiya dismissed Wall Street’s criticism of how individual investors are coming together on social media – particularly on the Reddit message board on the streets, and on GameStop and a handful of other actions as professionals – as hypocrites. He said that hedge funds try to push stocks all the time.
He said allowing hedge funds to sell 140% of GameStop’s shares could be considered irresponsible.
GameStop’s stock jumped initially earlier this month after the company said Chewy co-founder Ryan Cohen was joining his board. As buyers invested in the stock, short positions were sent to the hills.
A sell squeeze occurs when a stock with a large block of short sellers starts to rise in price, and short positions struggle 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’s shares, some other shares like AMC Entertainment, is much more than just a trading story, arguing that it is a push again for the establishment.