CNBC’s Jim Cramer on Tuesday applauded GameStop and AMC Entertainment for issuing new shares, which he said upset many people in the Reddit investment crowd.
The ‘Mad Money’ host, targeting the ‘hold the line’ group of investors who get shares from the Wall Street Bets forum, said their plans to offer new shares and raise cash to run their operations improve, should not disapprove.
“If you care about the future of one of the companies or for the long term of their shares, the issuance of shares here is the right step,” Cramer said. “But the multitude ‘hold the line’ they hate 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 that would allow the sale of another 500 million shares on the secondary market. GameStop has submitted a prospectus to sell up to 3.5 million common shares in its own stock offering program.
AMC hopes to use the funds to improve its balance sheet, while executives of the beleagured GameStop want to design a reversal story.
“AMC and GameStop need money,” Cramer said. “Raising capital is good for both companies, and in the long run, the stock should be good for the company.”
As for the ‘hold the line’ strategy, Cramer is concerned that too many investors have unrealistic expectations that they could accumulate in a stock and force the stock price to rise.
“I find this whole story insane,” he said. “When the Wall Street Bets group takes over the flow of certain shares, they want to name the shots and they expect the management and all the shareholders to obey it. Well, honestly, it’s a recipe for disappointment.”