The “Bad money” Host made his comments after a meeting in which GameStop shares rose nearly 16% and AMC rose 19% on Wednesday.. Stocks are up 37% this week alone, or more than 60% in speculative trading took Wall Street by storm in January resumed.
“Anyone who shorts AMC or GameStop is insane … WallStreetBets are too powerful and trying to bet against them now just gives them more ammo,” Cramer said.
Despite some optimism a possible turnaround led by Tough Cramer, co-founder of Ryan Cohen, claimed the video game retailer GameStop is still vastly overrated. AMC – which is still facing headwinds due to increasing digital streaming – is also expensive at the current level, said Cramer.
But Cramer, the companies, don’t trade on fundamentals, which makes shorting their stocks dangerous as long as they are loved by Reddit traders.
Shorting a stock is essentially a bet that the price will fall. An investor such as a hedge fund borrows stocks and then immediately sells them in the market to later buy them back at a lower level. Then the investor returns the borrowed shares and benefits from the price difference.
If the opposite happens and the value of the stock increases, a short seller can try to minimize losses by buying stocks at their higher price.
Both GameStop and AMC have sold over 20% of their float shares short, according to S3 Partners. This compares to an average 5% short stake in a typical US stock.
“I’ve never seen anything like it: a group of buyers with no price sensitivity,” said Cramer. “These people don’t have unlimited firepower, but they have enough firepower to develop a short squeeze if a group of professionals decide to bet against this thing.”
– – CNBC’s Yun Li contributed to this report.