Leon Cooperman told CNBC on Thursday that he believes Reddit-fueled trading frenzy involving GameStop shares will end badly. However, the billionaire investor said he did not blame those who started the short epic, which sent the stock to dizzying heights in recent days.
“He’s not convicted. I’m just saying from my experience, this will end in tears,” Cooperman told Fast Money: Halftime Report, as shares of the besieged video game vendor fell about 25 percent. At the beginning of the session, GameStop shares reached an all-time high of $ 483, but came under pressure as numerous retail brokerages put limits on transactions.
Cooperman said he has no position in GameStop. However, taking a quick look at the financial situation, he said that the company’s declining sales do not support such high levels in the current share price or something very close.
“GameStop is not worth $ 500, not $ 400, not $ 300, not $ 200, not even $ 100, not even $ 50,” said Cooperman, president of the Omega Family Office. He added that “investors” do not own GameStop – only “speculators” have.
Cooperman said he believes the current moment in the stock market – including the online hype pumping heavily shortened stocks – is the result of many factors, including near-zero interest rates set by the Federal Reserve in response to the coronavirus pandemic. He also said that the fiscal response from Congress plays a role.
“Everything is interconnected,” said Cooperman, the son of a Bronx plumber who later became one of Wall Street’s most successful investors. “The reason the market does what it does is that people stay home, get checks from the government, basically trade without commissions and interest. I’m not saying they’re stupid. Show me a guy with a good record consistently and I’ll he looked like a smart guy. “
Just last week, Cooperman had warned of “euphoria” in parts of the stock market. GameStop shares traded below $ 50 on the day of Cooperman’s remarks.
“We have gone through cycles like this in the past. This is extreme, more, but this will also happen,” the hedge fund pioneer said on Thursday. For example, he noted that Cisco Systems shares reached valuations during the dot-com boom, which far exceeded the company’s sales and did not return to the peak of that era even about two decades later.
“At the end of the day, the stock market reflects economic progress or lack thereof,” he said, adding that “water is looking for its own level.”