Investor Chamath Palihapitiya will donate his earnings from GameStop's rally to the Barstool Fund, which supports struggling small businesses

• Billionaire investor Chamath Palihapitiya was part of the effort to drive up GameStop's stock.
• Palihapitiya says he will donate his initial investment and profits to The Barstool Fund.
• The Barstool Fund gives money to small businesses suffering because of the pandemic.

Billionaire investor Chamath Palihapitiya will donate the money he made short-selling GameStop stock to Barstool's small business fund, he told CNBC.

Palihapitiya joined in with Reddit investors driving up the price of the game store's stock, which rose 157% Wednesday following Elon Musk's Tuesday tweet of "Gamestonk!!". Palihapitiya announced that he bought 50 call options in GameStop. GameStop's stock has risen a massive 750% in 2021 as online retail investing group WallStreetBets drove the stock up.

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital's short positions

Palihapitiya told CNBC that he will donate $500,000, his initial GameStop investment and all the profits, to the Barstool Fund. He said he closed out of the stock this morning.

The Barstool Fund, founded by Barstool Sports founder Dave Portnoy, raises money to support struggling small businesses during the pandemic and "save as many jobs as possible," according to the Fund's website. So far, it has raised nearly $33 million from 205,525 supporters to fund 187 businesses. Recipients include bowling alleys, salons, with the overwhelming majority being restaurants and bars.