CNBC’s Jim Cramer on Tuesday applauded GameStop and AMC Entertainment for the issuance of new shares.
The host of “Mad Money” targeted the “hold the line” cohort of investors who are getting stock tips from the Wall Street Bets forum, saying their plans to offer new shares and raise money to run their business. improve, should not be rejected.
“If you care about the future of either company or the long-term trajectory of their shares, issuing shares is the right move here,” Cramer said. But the hold the line crowd hates these sacrifices … 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 allowing the sale of an additional 500 million shares in the secondary market. GameStop has filed a prospectus to sell up to 3.5 million common shares in its proprietary stock offering program.
AMC hopes to use the money to improve its balance sheet as executives at the beleaguered GameStop try to develop a turnaround story.
“AMC and GameStop need money,” said Cramer. “Raising capital is good for both companies and in the long run, what’s good for the company should be good for the stock too.”
As for the “hold the line” strategy, Cramer is concerned that too many investors have unrealistic expectations that they can pile into a stock and force its stock price to rise.
“I think this whole story is insane,” he said. “When the Wall Street Bets cohort takes over the flow of certain stocks, they want to be in control and expect management and all shareholders to obey. Well, frankly, that’s a recipe for disappointment.”