Jim Cramer of CNBC applauded GameStop and AMC Entertainment on Tuesday for issuing new shares, moves he said angered many of the Reddit crowd.
The host of “Crazy Money” has proposed a cohort of investors who “receive the line”, who receive advice on shares from the Wall Street Bets forum, saying that their plans to offer new shares and raise cash to improve their operations they should not be confused.
“If you care about the future of any company or the long-term trajectory of their shares, issuing shares here is the right measure,” Cramer said. “But the crowd ‘holds the line’ hates these offerings … and despises anyone who defends them.”
“It can only go that far,” he added.
AMC expects shareholders to vote on a measure authorizing 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 equity offering program.
AMC hopes to use the funds to improve its balance sheet, while the directors of the besieged GameStop are looking to project a story of change.
“AMC and GameStop need money,” Cramer said. “Capital growth is good for both companies and in the long run, what is good for the company should be good for stocks.”
As for the “keep the line” strategy, Cramer worries that too many investors have unrealistic expectations that they may pile up in a stock and force the price of the stock to rise.
“I find this whole story crazy,” he said. “When the Wall Street Bets cohort takes over the flow of certain actions, they want to realize and expect management and all shareholders to obey. Well, honestly, this is a recipe for disappointment.”