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Investor Einhorn says Palihapitiya, Musk poured 'jet fuel' on GameStop

Stock MarketsApr 15, 2021 06:25PM ET
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© Reuters. FILE PHOTO: Greenlight Capital's Einhorn speaks at a conference

By Svea Herbst-Bayliss

BOSTON (Reuters) - Investor David Einhorn said on Thursday that prominent venture capitalist Chamath Palihapitiya and entrepreneur Elon Musk threw "jet fuel" on the GameStop Corp (NYSE:GME) trading frenzy in January when the video retailer's shares rose by 2,000% and later prompted a hearing in U.S. Congress.

Einhorn, who runs hedge fund Greenlight Capital, also said U.S. lawmakers seeking answers to how day traders were able to wrest control of GameStop's share price from established hedge funds should probe regulators instead of investors.

Amateur investors organized on social media sites such as Reddit staged a stubborn buying spree three months ago, winning out over Wall Street hedge funds that had shorted GameStop's shares or bet that the price would fall.

The wild price swings caused heavy losses for hedge fund Melvin Capital, among others. U.S. lawmakers reacted by organizing a U.S. House of Representatives hearing in February where they quizzed hedge funds, a day trader and the chief of the online trading app Robinhood.

Einhorn on Thursday blamed Palihapitiya and Tesla (NASDAQ:TSLA) Inc's CEO, Musk, for throwing what he called "jet fuel on the GME squeeze." His comments appeared in a quarterly letter to Greenlight Capital investors which was seen by Reuters.

Representatives for Palihapitiya and Musk did not immediately respond to requests for comment.

Einhorn said it is appropriate for investors to discuss stocks.

"Investors discussing why they think GameStop (or any other stock) should go up or down ought to be encouraged," he wrote. "There is no reason to drag anyone before Congress for making a stock pick."

Einhorn said Palihapitiya, who appeared on TV in late January and dismissed criticism of day traders, might have been trying to harm Robinhood because it competes with fintech startup SoFi, which was backed by Palihapitiya.

And Musk, whose Tesla shares Einhorn has long bet against, waded in to the drama by tweeting "Gamestonk!!" and adding a link to the Reddit forum where day traders were discussing GameStop.

"If regulators wanted Elon Musk to stop manipulating stocks, they should have done so with more than a light slap on the wrist when they accused him of manipulating Tesla's shares in 2018," Einhorn wrote.

Einhorn said if lawmakers wanted to understand "why GameStop did what it did ... it would be better to call to account the absentee regulators and their philosophical backers."

He told investors that his Greenlight Capital Funds were essentially flat in the first quarter, inching down 0.1%, while the S&P500 index gained 6.2%

Investor Einhorn says Palihapitiya, Musk poured 'jet fuel' on GameStop
 

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Comments (5)
Don Gamestop
Game_Over_Hedgie Apr 16, 2021 1:15AM ET
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Omg, why don't you go cry in your lambo and cover those shorts?! How about they look into the new superhero on the block, the dark pool? 💎👐🚀I love the stock
Star Boi
Star Boi Apr 15, 2021 11:04PM ET
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The issue here is not shorting and the hedge funds getting burned. The real issue which no one on Wall Street wants discussed is "Naked Shorts." These hedge funds are shorting stocks in an unnatural way. What is meant by this is they do not possess the shares, nor have they loaned them from holders of the stock for a fee or interest. They are naked, its like a wager, gambling they can force a stock down. Its manipulation and illegal in many countries, but not the USA. This reform has been resisted and those in the know have paid off or pressured the regulators to stay out. How, because they stack the regulators with their cronies. Pure and simple.
Eudon Hickey
Eudon Hickey Apr 15, 2021 8:07PM ET
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Never the fund managers fault. Always somebody else
Clinton Powell
Clinton Powell Apr 15, 2021 6:48PM ET
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Washington will pribably call another hearing on the hearingWhat a crockThe stock turned against the short seller. Take your losses as you take your gains
Jack Dalton
JackDaltonAU Apr 15, 2021 5:44PM ET
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guy sounds salty as ****** he must of got short squeezed also
Barak David
Barak David Apr 15, 2021 5:44PM ET
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yep.. gone from being a billionaire to a millionaire 🤣🤣
trevor hron
trevor hron Apr 15, 2021 5:44PM ET
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He sure did. Hes known for shorting stocks. It wouldnt be the first time he got burned. Its pretty funny that Musk burned him twice
 
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