Prices could reach “unimaginable highs”
As shares of AMC Entertainment and other so-called memes recoup their losses on Monday, billionaire Thomas Peterffy, founder and chairman of Interactive Brokers, warned investors against short selling volatile stocks, saying that prices could continue to soar to sky highs for an undetermined amount. long before finally collapsing on core values.
On CNBC Scream BoxPeterffy warned investors considering betting against AMC and other memes stocks by selling their stocks short, saying their prices could skyrocket to “unimaginable highs before settling at a reasonable valuation.” .
“You may have to cover the climax,” Peterffy said, alluding to a series of AMC short sellers who lost $ 5 billion last week to close their short positions and cut losses as prices climbed nearly 140% through Wednesday.
Despite the warning that stocks could still skyrocket, Peterffy also said it would be “impossible” for stocks to hold onto skyrocketing gains because “more and more people will be short” of stocks if the prices continue to climb.
“Eventually those stocks will revert to their roughly single-digit dollar value, if they do,” said the 76-year-old, ultimately advising against holding any stocks.
AMC shares jumped more than 15% on Monday, pushing the stock’s gains to 2,700% this year alone, more than 20 times the S&P 500’s top-performing stock, Marathon Oil.
Other memes stocks, many of which collapsed on Thursday, also recouped losses on Monday, with Blackberry, GameStop and Bed Bath & Beyond up 9%, 6% and 5%.
“It is extremely tempting to sell these stocks short, but unless you have enormous liquid resources, try to resist the temptation,” Peterffy said Monday. “These prices can reach unimaginable highs before settling at a reasonable valuation, and you may have to cover on the high point.”
$ 22.7 billion. That’s what Peterffy is worth on Monday, according to Forbes. He founded Interactive Brokers in 1993 and was its CEO until December 2019.
After falling 70% in late January, AMC and other memes stocks are skyrocketing again this month despite bouts of intense volatility. AMC stock more than tripled in the week to Wednesday as increased activity on options and rising short interest helped retail traders crowd out institutional investors again of their risky bets, but shares fell 40% on Thursday after the company warned its stock had become massively overvalued. Several other memes stocks, most of which are among Wall Street’s most heavily shorted companies, rode the price wave in tandem. “The retail force behind this move is still strong, so anyone can guess how big this bubble can get,” Ed Moya, Oanda’s senior market analyst, said in a note last week. .
What to watch out for
While pundits aren’t sure how long memes’ stocks could continue their volatile tear, many believe regulators could ultimately curb the rise of frenzied trading. In a congressional hearing last month, Securities and Exchange Commission Chairman Gary Gensler suggested regulators would crack down with new rules targeting online brokerage houses like Interactive Brokers and Robinhood. In the meantime, some large brokerage firms, such as TD Ameritrade, have already took steps to restrict trading in AMC shares amid the recent rise.
AMC Entertainment Raises $ 587 Million After Soaring 2,900%, But Warns Investors Could Lose It All (Forbes)
Not Just AMC: These are the meme stocks Reddit traders are pumping again as pundits call for ‘extreme caution’ (Forbes)
Meme stock crash: AMC plunges after investor warning – sparks $ 10 billion sell-off (Forbes)