Cramer sees retail buyers banding collectively in opposition to Wall Road hedge funds on-line as a brand new paradigm
The power of the internet is bringing individual investors together to crush Wall Street hedge funds and other investment bigwigs. It’s a new trend that’s just getting started, CNBC’s Jim Cramer said on Monday.
“It’s the ‘Wallstreetbets’ people.” And they have teamed up, probably for the sake of freedom of speech, to focus on some stocks, “said Cramer, referring to the Reddit forum r / wallstreetbets. The few stocks the Mad Money host mentioned are GameStop, Bed Bath & Beyond, and AMC Entertainment – all heavily shorted and all in epic short squeezes.
Short selling is a bet against a stock where traders sell stocks that they have borrowed in hopes of buying them back in the future. You return the number of shares borrowed and pocket the price difference.
A short squeeze occurs when a stock rises in price with a large block of short sellers and short positions make an effort to buy stocks at the currently higher prices to limit their losses. You return the number of shares borrowed and lose the price difference.
GameStop shares – up more than 500% this year – more than doubled again early Monday. The stock initially rose earlier this month after the video game seller said Chewy co-founder Ryan Cohen joined his board of directors. As buyers plowed into the stock, shorts were sent to the mountains. Later on Monday, GameStop, which has been stopped a few times due to volatility, reduced its profits.
“GameStop, I guess why you’re here, that Ryan Cohen did a great job at Chewy,” said Cramer. “This is the paradigm. You will see it at Bed Bath & Beyond with a loop upgrade. You will see it at Adam Aron’s company AMC,” which was on the verge of bankruptcy due to coronavirus issues, closings and lack of demand during the pandemic.
“I’ve never seen guns like this before,” Cramer said on Squawk on the Street. “You can break shorts.”
AMC shares rose more than 30% early Monday after the cinema chain announced in an SEC filing that it had raised $ 917 million in new equity and debt since mid-December. This was enough funding to keep it open and operational through 2021. AMC rose nearly 18% Friday.
Bed Bath & Beyond’s shares surged more than 40% to over $ 40 early Monday after Loop Capital raised its target price per share for the household goods retailer from $ 18 to $ 30. It later reduced its profits. Bed Bath & Beyond rose more than 12% on Friday.
“It’s not necessarily foam here. It’s the mechanics of the market that is collapsing. It is questionable whether these people [buying these stocks] are all a group. But my securities attorney said, “Free speech covers that,” Cramer said. “They use arguments that they believe will be scrutinized.” I don’t think they will. But it doesn’t matter what I think. “
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