CNBC’s Jim Cramer applauded GameStop and AMC Entertainment on Tuesday for issuing new shares.
Targeting the “Hold the Line” cohort of investors receiving stock tips from the Wall Street Bets forum, the “Mad Money” host said their plans to offer new stocks and raise funds to improve their business , shouldn’t be frowned upon.
“If you’re interested in the future of a company or the long-term performance of its stocks, issuing stocks up here is the way to go,” said Cramer. “But the crowd that holds the line hates these offerings … and they despise anyone who defends them.”
“It can only go so far,” he added.
AMC expects shareholders to vote in May on a measure to approve the sale of an additional 500 million shares in the secondary market. GameStop has filed a prospectus for the sale of up to 3.5 million common shares under its own stock offering program.
AMC hopes the funds will improve its balance sheet while executives at beleaguered GameStop attempt to reverse the trend.
“AMC and GameStop need money,” said Cramer. “Raising capital is good for both companies, and in the long run what is good for the company should be good for the stock.”
Regarding the “hold the line” strategy, Cramer fears that too many investors have unrealistic expectations that they could pile into a stock and let its share price rise.
“I think this whole story is crazy,” he said. “When the Wall Street Bets cohort takes over the flow of certain stocks, they want to be in charge and expect management and all shareholders to obey. Well, frankly, that’s a recipe for disappointment.”