On Wednesday, May 26, Jim Cramer of CNBC hit those who bet in on AMC Entertainment and GameStop. According to him, he was not sure why investors would waste their time on the two meme stocks that created loud news on the WallStreetBets forum on Reddit.
Cramer has left a series of comments about the sudden increase of shares of the two companies. During that day, GameStop's stocks have skyrocketed to 16% while the AMC shares shot up at 19%. While these indications are good news for those who bet their money to the said firms, there could be a downside in considering them.
Earlier this 2021, Wall Street has surprisingly boomed in popularity following the escalating stock of GameStop. The group behind the mania has reportedly gone frenzied which could potentially harm the health of the trading market. The r/wallstreetbets members even expanded to 3 million during the monstrous short squeeze.
Jim Cramer Calls GameStop, AMC Short Sellers 'Out of Their Mind'
According to CNBC, the "Mad Money" host, Jim Cramer said that WallStreetBets is "too powerful" and those bettors who are against it are only supplying it with more ammo. He added that those who are shorting GameStop or AMC are "out of their mind."
Last month, GameStop selected Ryan Cohen as its new chairman. The turnaround has received a lot of positive reviews from the users. However, this does not sound good for Cramer as he stated that the video-game retailer was too high for its fundamentals--hence "overvalued."
Meanwhile, Cramer also whipped AMC despite its steady upsurge in its digital media service. He said that at current levels, the cable television channel is still expensive.
Like what he said a while ago, these companies rely on their trading technique that is not in line with the basics. This makes it hard for them to be trusted by the investors since shorting their stocks can be "dangerous.
Jim Cramer Says People Are 'Insensitive' to Price
The concept for stock shorting can be simplified into two words: borrow and share. For example, a hedge fund will make use of the shares at first. Later, they will now be sold into the market so that they could purchase it at a lower price. In this way, the person could collect a profit through the price differential.
However, in case the stock value increases, the minimization of losses is possible for the short-seller through buying the stocks for a higher value.
"The dynamic is similar in GameStop. I was worried about this chain because it has lost its reason for being: Electronic games are now downloaded, cheaper, faster, better. You don't need GameStop, except for hardware, and anybody can sell you hardware," Cramer said in a report by Real Money.
The 66-year-old co-founder of TheStreet.com continued that buyers could sometimes be insensitive to the prices. While they have no infinite ammo, Cramer said that there are buyers who still manage to manipulate the short-squeeze sequence when the betting time comes.
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Written by Joseph Henry
