Billionaire entrepreneur Mark Cuban told CNBC on Tuesday that he believes the Reddit merchants who helped fuel the GameStop short squeeze and subsequent stock surge will remain a force in the market.
‘I’ve always been taught,’ You get tall and you get loud, ” said Cuban on ‘Squawk Alley. “You go out and create more buyers for your stock and the stock price goes up and that’s exactly what’s happening here, except it’s only WallStreetBets doing it ‘noisily’.”
Cuban’s comments came when GameStop shares fell about 50% on Tuesday to about $ 111 each, a day after losing nearly a third of their value.
The video game retailer’s stock – which rose 400% last week and reached an all-time high of $ 483 a share at some stage – began to rise in response to a brief push that occurred when online traders hit sites like the WallStreetBets- Reddit’s forum plunged into the heavy-bet against stock.
Cuban, who made billions of dollars during the dotcom boom, said he believes those online investors have gained valuable knowledge through the short squeeze, as well as the volatile cryptocurrency market. “I think this is real,” said the “Shark Tank” investor and owner of the NBA’s Dallas Mavericks.
“I think now that they have seen their strength and now that they have learned some lessons, we will get more of it, not less,” he added. “It will not be circumstances where all these people have lost money, they will go home with their tails between their legs and they will never do this again.”
Short selling is a strategy where an investor borrows stock from a company and then immediately sells it, expecting the price to fall in the future. The short seller buys back the shares at the lower price and returns the borrowed shares, taking advantage of the difference.
When the opposite happens, such as when online traders rush into GameStop, hedge funds and other investors who have shorted the stock can try to minimize their losses by buying stock at the current higher price. Both groups of investors buying the stock are contributing to the upward momentum.
Disclaimer
Disclosure: CNBC owns the exclusive non-network cable rights to “Shark Tank,” which Mark Cuban is a co-host.