David Einhorn, President of Greenlight Capital, speaking at the 2019 Sohn Investment Conference in New York City, USA, May 6, 2019. REUTERS / Brendan McDermid / File Photo
Investor David Einhorn said Thursday that prominent venture capitalist Chamath Palihapitiya and entrepreneur Elon Musk threw “jet fuel” on GameStop Corp’s (GME.N) trading frenzy in January when the video retailer’s stock rose 2,000% and later prompted a hearing in the USA. Congress.
Einhorn, who runs hedge fund Greenlight Capital (GLRE.O), also said that U.S. lawmakers seeking answers to how day traders could take control of GameStop’s stock price from established hedge funds should investigate regulators rather than investors.
Amateur investors who organized on social media sites such as Reddit carried out a stubborn shopping spree three months ago, winning the Wall Street hedge funds that had shorted GameStop’s stock or betting the price would drop.
The wild price fluctuations caused heavy losses for hedge fund Melvin Capital, among others. US lawmakers responded by hosting a hearing of the US House of Representatives in February, where they questioned hedge funds, a day trader and the chief of the online trading app Robinhood. read more
On Thursday, Einhorn blamed Palihapitiya and the CEO of Tesla Inc (TSLA.O), Musk, for throwing what he called “jet fuel on the GME squeeze.” His comments appeared in a quarterly letter to Greenlight Capital investors seen by Reuters.
Representatives for Palihapitiya and Musk did not immediately respond to requests for comment.
Einhorn said it is appropriate for investors to talk about stocks.
“Investors discussing why they think GameStop (or any other stock) should go up or down should be encouraged,” he wrote. “There is no reason to drag anyone to Congress to make a stock selection.” read more
Einhorn said Palihapitiya, which appeared on TV in late January and rejected criticism of day traders, may have tried to harm Robinhood for competing with fintech startup SoFi, which was backed by Palihapitiya.
And Musk, whose Tesla stock Einhorn has long bet against, waded into drama by tweeting “Gamestonk !!” and adding a link to the Reddit forum where day traders discussed GameStop.
“If regulators wanted Elon Musk to stop manipulating stocks, they should have done so with more than a light slap to the wrist when they accused him of manipulating Tesla’s stock in 2018,” Einhorn wrote.
Einhorn said if lawmakers wanted to understand “why GameStop did what it did … it would be better to hold the absence regulators and their philosophical backers to account.”
He told investors his Greenlight Capital Funds were essentially flat in the first quarter, down 0.1%, while the S & P500 index (.SPX) gained 6.2%.
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