From Svea Herbst-Baileys
BOSTON (Reuters) – Investor David Einhorn said Thursday that well-known venture capitalist Chamat Palihapitiya and entrepreneur Elon Musk were throwing “jet fuel” at GameStop Corp’s hectic trading in January, when the video trader’s shares rose 2,000% and later. hearing in the US Congress.
Einhorn, who manages the hedge fund Greenlight Capital, also said U.S. lawmakers are looking for answers to how day traders have managed to gain control of GameStop’s stock price from established hedge funds instead of investing.
Amateur investors on social media sites such as Reddit staged a hard buyout three months ago, winning Wall Street hedge funds that had cut GameStop shares or bet the price would fall.
Wild price fluctuations have caused large losses for the hedge fund Melvin Capital, among others. U.S. lawmakers responded by holding a hearing in the US House of Representatives in February, where they tested hedge funds, a trader of the day and the head of the online trading application Robinhood.
Einhorn accused Palihapitiya and Tesla Inc. CEO Musk on Thursday of throwing what he called “jet fuel on GME leaching.”
Representatives of Palihapitiya and Musk did not immediately respond to requests for comment.
Einhorn said it was appropriate for investors to discuss the shares.
“Investors discussing why they think GameStop (or other stocks) should go up or down should be encouraged,” he wrote. “There’s no reason to drag someone in front of Congress to choose stocks.”
Einhorn said Palihapitiya, which appeared on television in late January and dismissed criticism of daily traders, may have been trying to harm Robinhood because it was competing with fintech-launched SoFi, which was backed by Palihapitiya.
And Musk, whose shares of Tesla Einhorn have long pledged, joined the drama by writing “Gamestonk !!” on Twitter and adding a link to the Reddit forum where daily traders discussed GameStop.
“If regulators wanted Elon Musk to stop manipulating shares, they had to do so with more than a light slap on the wrist when they accused him of manipulating Tesla shares in 2018,” Einhorn wrote.
Einhorn said that if lawmakers want to understand “why GameStop did what it did … it would be better to address the absent regulators and their philosophical supporters.”
He told investors that his Greenlight equity funds were essentially equal in the first quarter, down 0.1%, while the S & P500 index gained 6.2%.
(Report by Svea Herbst-Baileys in Boston; Edited by Matthew Lewis)