Kevin O’Leary, co-founder of O’Shares ETFs, told CNBC on Wednesday that he started trading with users of Reddit’s WallStreetBets forum in hopes of better understanding the online community that played a key role in the recent GameStop played short press.
In an interview on Squawk Box, O’Leary said he deposited $ 10,000 into an account with the popular brokerage app, Robinhood, and said he joined Reddit to “join the pack” row’.
“There’s a whole new sheriff in town and they’re not stupid,” said O’Leary, also an investor in Shark Tank. He added that he was impressed by the sophistication shown by some Reddit users, saying that they ‘are not as stupid as everyone thinks.
“They are looking for situations with a short circuit that has thin floats. They organize the night before and go after the stocks, and in most cases they drive it up,” he said, adding that he made 5% on Tuesday. on some crazy pharmaceutical company I’ve never heard of. “
As part of a personal experiment, O’Leary said he compares the performance of his day trading account to the returns he generates through a robo-advisor, who uses computers to manage money. “I’m now watching my robo-advisor defeat me. The point is that this is fantastic democratization” and an important lesson on the risks of trading versus longer-term investments in a diversified portfolio, “he added.
O’Leary’s remarks Wednesday come a day before the House Financial Services Committee is holding a hearing focused on the Game Manop trading mania that erupted in late January.
The shares of the video game rose higher as retailers who gathered on sites like Reddit rushed to buy the strong bet against shares. Hedge funds such as Melvin Capital, which has shortened the stock, have tried to minimize their losses by buying shares at higher prices, which has increased the rising momentum in GameStop. With both of these forces underway, GameStop rose from less than $ 20 a share in early January to an intraday high of $ 483 on January 28 – a huge increase of more than 2,300%. The stock has since fallen below $ 50.
At the peak of the insane activity, brokers like Robinhood have placed temporary trading restrictions on GameStop and other heavily shortened stocks. Lawmakers will certainly question CEO Vlad Tenev during the hearing Thursday. Melvin Capital CEO Gabriel Plotkin, Reddit CEO Steve Huffman, and Keith Gill – a Reddit and YouTuber user who helped fuel GameStop craze – will also take part in the trial.
O’Leary said he believes most people who criticize brokers like Robinhood and users on Reddit do not have first-hand experience with any platform. Therefore, he decided to start using both platforms.
In doing so, O’Leary expects to show newcomers to the stock market that it is difficult to earn day trading and that long-term investment is the best way to build wealth. “I think education is powerful and important,” he said.
Disclosure: CNBC owns the exclusive rights to cables outside the network ″Shark Tank, “of which Kevin O’Leary is a co-host.