Shares of GameStop closed higher by 18% on Monday to $76.79 apiece following a wild trading session in which it was halted multiple times for volatility. At one point, the stock more than doubled and then turned negative before returning to positive territory. GameStop shares are up more than 300% this month.
The heavily shorted stock initially popped earlier this month after GameStop announced Chewy co-founder Ryan Cohen was joining its board of directors. And in online chat rooms on websites like Reddit, GameStop has become a favorite, with some retail investors and day traders seeking to drive shares upward and squeeze out short sellers, who essentially bet that a stock is going to fall.
Cramer advised “Mad Money” viewers to stay on the sidelines.
“At the end of the day, GameStop’s become a battleground stock,” he said. “It’s no longer about the company, people. It’s about the players, and there are easier ways to make money than betting on cheerleaders or possible government investigation.”
Cramer said he believes that Wall Street players who hold bearish views on the future of GameStop are probably right — especially now at these elevated prices.
“I think the stock’s gotten overvalued and the insider selling, by the way, has been pretty aggressive,” Cramer said. “Yet you could argue that Ryan Cohen is a miracle worker and maybe the CEO of GameStop will use these prices to do a large equity offering, clean up its balance sheet, maybe even diversify into more successful, different ideas.”
The short-sellers who have so far been on the losing end of the moves in GameStop shares aren’t happy, Cramer said, noting that some people may question the legality of people rallying behind the stock through online forums such as the Reddit forum r/wallstreetbets.
“Look, I think the longs have every right to make their case. If you like a stock and you want to cheerlead, more power to you,” Cramer said. “Nothing is wrong with expressing your honest opinion as long as you’re not making fraudulent claims or pumping and dumping, which is a crime and the government will pursue the fraudsters,” he said.
“I think the shorts are probably right that it’s too expensive,” he added, “but they can’t win until the longs either declare victory or run out of ammo.”