CNBC’s Jim Cramer on Tuesday applauded GameStop and AMC Entertainment for issuing new shares, moves that he said bothered many of Reddit’s investors.
The host of “Mad Money” pointed to the cohort of investors “keeping the line” receiving advice on Wall Street betting forum shares, saying their plans to offer new shares and raise money to improve their operations should not be frowned upon.
“If you’re interested in the future of any company or the long-term trajectory of its shares, issuing shares here is the right step,” Cramer said. “But people” keep the line “they hate these offerings … and they despise anyone who defends them.”
“It can only go that far,” he added.
AMC expects shareholders to vote in May on a measure authorizing the sale of another 500 million shares in the secondary market. GameStop introduced a brochure to sell up to 3.5 million common stock shares in its own equity offering program.
AMC hopes to use the funds to improve its balance sheet, while executives at the besieged GameStop try to design a change story.
“AMC and GameStop need money,” Cramer said. “Capital raising is good for both companies and, in the long run, what is good for the company should be good for the shares.”
As for the “keep the line” strategy, Cramer worries that many investors will have unrealistic expectations that could build up in stocks and force stock prices to rise.
“I find this whole narrative crazy,” he said. “When the Wall Street Bets cohort takes on the flow of certain actions, they want to cope and expect management and all shareholders to obey. Well, frankly, that’s a recipe for disappointment.”