- Retail traders driving up meme stocks have “staying power,” said the former CEO of E*Trade.
- These investors have powerful tools at their disposal, including social media and trading apps, he said.
- When his own son asks about mem stocks and dogecoin, he says it’s all about fundamentals.
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The retail traders driving the meme stock frenzy are “here to stay,” but the current rally in shares of AMC Entertainment is not, said Karl Roessner, the former chief executive officer of E*Trade, in an interview with CNBC.
“This is not going to end well,” Roessner said of the AMC rally. “I think historically we we’ve seen this in the past, but I do believe this group has staying power.”
Shares of AMC jumped as much as 27% Monday following a record week in the stock that was largely driven by retail traders on Twitter and Reddit.
AMC, the world’s largest movie theater chain operator, became part of a new trend of so-called “meme stocks” earlier this year when retail investors on Reddit threads, most notably Wall Street Bets, began pouring into certain stocks like GameStop in order to squeeze short sellers.
Wall Street Bets since has ballooned into an army of retail traders numbering more than 10 million users.
In the interview with CNBC, Roessner, who is now the CEO of Lefteris Acquisition Corp., said with the availability of social media and trading platforms, the group has “powerful tools” at their fingertips, giving them “staying power.” Apps like Robinhood, WeBull, and Public, have grown in size amid interest from new investors.
He said his own sons, who both have E*Trade accounts, have picked up on investing.
“They keep hitting me as to, ‘Why don’t we own any dogecoin, or why don’t we get involved with one of these meme stocks?’ And I always bring it back to fundamentals,” he told CNBC. “Then they hear from their friends that they just made $10,000 on dogecoin, and they’re going to take the rest of the summer off. So how do you combat that?”
He said educating in financial literacy is key. For example, all of the money retail traders are investing in hyped up stocks should be risk capital, he said, because there’s a chance a person could “lose everything.”
“I always worry about the last retail trader who’s left holding the bag when the music stops,” he said, noting the last retail traders to invest during the internet bubble or before the market crash that prompted the Great Recession.
With regard to AMC specifically, Roessner said he applauds management raising capital to address balance sheet problems. But overall, “Absent some serious strategic undertakings by that company, it’s still just not worth what it’s trading for right now.”
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