This Maverick knows a lot about Robinhood.
The next chapter of the WallStreetBets saga is finally beginning to unfold, now that the retail investors have gotten advice from an unexpected source: Shark Tank host and owner of the Dallas Mavericks, Mark Cuban.
The past few days have been challenging for the retail investors that sent the stock prices of theater giant AMC and video game store GameStop to the moon. After seeing huge gains from attacking the shorts multiple hedge funds, the price of both stocks has plummeted by as much as 50 percent, largely due to the free stock trading app Robinhood limiting the trading on AMC and GameStop.
On Tuesday, Cuban did an AMA (ask me anything) on the WallStreetBets subreddit to help describe why the stock was falling. Cuban said, “The source of demand has been crippled. When RH shut it down, then cut it back, let’s put aside why, they cut off the greatest source of demand. They created a Robinhood dive. No RH buyers means sellers lower their price to find buyers. And they keep on lowering it till they find buyers. Keep the most natural buyers out of the market and the price keeps on FALLING.”
Basically, what this means is that since free trading has been deeply curtailed, the number of people who are willing to buy the stock has diminished, forcing the price to go down.
Talking mostly about GameStop, Cuban continued, “If you can afford to hold the stock, you hold. I don’t own it, but that’s what I would do. Why? Because when RH and the other online brokers open it back up to buyers, then we will see what WSB is really made of. That is when you get to make it all work.” The billionaire added, “I have no doubt that there are funds and big players that have shorted this stock again thinking they are smarter than everyone on WSB. I know you are going to hate to hear this, but the lower it goes, the more powerful WSB can be stepping up to buy the stock again.”
This may be helpful advice, but not the easiest pill to swallow for the members of WallStreetBets. Holding rather than selling the stock is getting more difficult as the price continues to fall. But it is likely the price will bounce back due to a second squeeze. What is worth remembering is that so many of the investors have a goal that goes beyond simply making money.
Courtesy of Reddit.com
Are you still holding? Tell us in the comments if you are or if anyone you know has gotten involved.