Billionaire businessman Mark Cuban told CNBC on Tuesday that he believes Reddit traders who helped bring about GameStop’s short squeeze and subsequent stock hike will remain a force in the market.
“They always taught me,‘ You get long and you get strong, ’” Cuban told Squawk Alley. “Go out there and create more buyers for your stocks and the stock price goes up and that’s exactly what happens here, except that only WallStreetBets is doing the “strong”.
Cuban’s comments came as GameStop shares fell about 50 percent on Tuesday to about $ 111 each, a day after losing nearly a third of their value.
Shares of the video game retailer, which rose 400% last week to an all-time high of $ 483 a share at one stage, began to skyrocket in response to small pressure that occurred when traders in online sites like the Reddit WallStreetBets forum were betting on the strong bet – against stocks.
Cuban, who earned billions of dollars during the dot-com boom, said he believed those online investors had gained valuable insights thanks to the short-term slump as well as the volatile cryptocurrency market. “I think that’s real,” said investor “Shark Tank” and owner of the NBA Dallas Mavericks.
“I think now that they have recognized their power and now that they have learned some lessons, we will learn more, not less,” he added. “It won’t be a set of circumstances where all these people lose money, they’ll go home with their tail between their legs and they’ll never do it again.”
Short selling is a strategy in which an investor borrows shares of a company and sells them immediately, waiting for the price to drop in the future. The short seller repurchases the shares at their lowest price and returns the borrowed shares, profiting from the difference.
When the opposite happens, like when online traders rushed to GameStop, hedge funds and other investors who had bought short stocks may try to minimize their losses by buying shares at the current highest price. Both groups of investors buying the shares add to the upward momentum.
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Disclosure: CNBC owns the exclusive cable rights outside the “Shark Tank” network, in which Mark Cuban is a co-host.