“Mad Money” host Jim Cramer explained his worries about the “hold the line” strategy that’s become a fan favorite among the Reddit investing community. Subscribe to CNBC Pro to access the full episode of Mad Money: https://cnb.cx/3cUrow1
CNBC’s Jim Cramer on Tuesday applauded GameStop and AMC Entertainment for issuing new shares, moves he said upset many in the Reddit investing crowd.
The “Mad Money” host took aim at the “hold the line” cohort of investors that get stock tips from the Wall Street Bets forum, saying their plans to offer new shares and raise cash to improve their operations should not be frowned upon.
“If you care about the future of either company or the long-term trajectory of their stocks, issuing shares up here is the right move,” Cramer said. “But the ‘hold the line’ crowd they hate these offerings … and they despise anyone who defends them.”
“It can only go so far,” he added.
AMC expects shareholders to vote in May on a measure authorizing the sale of another 500 million shares on the secondary market. GameStop submitted a prospectus to sell up to 3.5 million shares of common stock in its own equity offering program.
AMC hopes to use the funds to improve its balance sheet, while executives at the beleaguered GameStop seek to engineer a turnaround story.
“AMC and GameStop need money,” Cramer said. “Raising capital is good for both companies and over the long haul, what’s good for the company should be good for the stock.”
As for the “hold the line” strategy, Cramer worries too many investors have unrealistic expectations that they can pile into a stock and force its share price to go up.
“I find this whole narrative insane,” he said. “When the Wall Street Bets cohort takes over the flow of certain stocks, they want to call the shots and they expect management and all the shareholders to obey. Well, frankly, that is a recipe for disappointment.”
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