How Steve Cohen Crushed Whitney Tilson

steve cohenSteve Cohen

Looks like Steve Cohen caused Whitney Tilson some pain on his Netflix and OpenTable shorts.In some circumstances, multi-billion hedge fund managers might squeeze a short just because they can, and Tilson’s ~$200 million T2 Partners is relatively tiny. Cohen’s SAC runs about $12 billion. 

Using ample cash alone, Cohen could have easily crushed Tilson’s shorts (which Tilson publicly lauded on media outlets like CNBC) by providing

excess demand, buying up the stock over time, and forcing the price upward, aka squeezing the short.

And according to a new interview with Cohen (and PTJ) at a recent conference, that’s exactly what he did.

From Dealbook’s coverage of the interview:

[Cohen said that his] favourite sectors are mobility apps and businesses that create faster networks or enable consumers on the Internet, [and he cited] Netflix and OpenTable as examples.

Whether it was on purpose and just for fun after he saw Tilson talk his book, or not — the Cohen trades hurt Tilson’s book.

This is not to say that Cohen targeted just Tilson, because he probably didn’t, but Tilson is a popular investor whose trades many people follow. And it looks like his CNBC call was one of the things that added to Netflix becoming a “crowded short,” and providing other investors a simple reason to buy the dip.

Thus, Tilson recently had to cover his Netflix short, probably largely because of Cohen.

Click here for a guide to major hedge fund moves last quarter >

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