Mark Cuban on Thursday cheered the epic short squeeze in GameStop shares, telling CNBC he believes the contingent of investors hyping the stock on sites like Reddit have taken a page out of Wall Street pros’ own book.
“It’s not the first time low float or heavily shorted stocks have been targeted,” Cuban said on “Squawk Box.” “There are many hedge funds that have made a lot of money over the years targeting heavily shorted stocks. I don’t think this is anything different. It’s just the people who are making the push aren’t who we expect them to be and so that’s why I like it.”
“When you bring people out of nowhere to really show the inefficiencies of the market, it’s a good thing,” the billionaire entrepreneur added. At the same time, Cuban noted he was concerned about valuations across a range of asset classes and has “hedged the heck” out of his investment portfolio.
The WallStreetBets crowd on Reddit is playing the speculative nature of the market, historically dominated by high-frequency computer-driver trading, Cuban said. While saying the stock market is not an investing market, but rather a trading market, he said if that’s to change the rules must be changed.
Cuban’s comments came as shares of GameStop soared early in the premarket, in a continuation of a massive surge this month. But later, however, GameStop turned negative. As of Wednesday’s close, the beleaguered video game retailer’s stock was up nearly 2,000% in January alone. It closed Wednesday’s session at $347.51, when just four months ago it was around $6 per share.
Short selling is a bet that a stock’s price will fall. But as GameStop’s stock took off this month, shorts sought to limit their potential losses by purchasing stock at the current higher prices. And in chat rooms and on other social media, retail investors continued to rally behind GameStop, adding more fuel.