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6 Highlights From Mark Cuban's Reddit AMA: GameStop, Robinhood, WSB And Much More

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6 Highlights From Mark Cuban's Reddit AMA: GameStop, Robinhood, WSB And Much More

Billionaire investor, Dallas Mavericks owner and "Shark Tank" star Mark Cuban hosted a Reddit AMA Tuesday morning where he fielded questions on the Reddit community across many topics. Here is a summary of the key takeaways.

1. GameStop Fiasco Isn't Unique: Cuban said the GameStop Corp. (NYSE: GME) short covering fiasco has "happened before" but the only difference this time around is it's the "big guys" battling the Reddit WallStreetBets crowds. One notable example from the past pitted billionaire investors Bill Ackman and Carl Icahn over Herbalife Nutrition Ltd (NYSE: HLF).

2. Why GameStop Stock Is Down: At the time of the AMA, GameStop's stock was flirting with the $80 per share level. Cuban said the fall is attributed to supply and demand.

Robinhood's decision to heavily restrict GameStop's stock on its platform removed "the greatest source of demand" for the stock. This means the many sellers must lower their acceptable price to find buyers.

"Then that drop accelerates because the more the stock falls the more owners who bought on margin get margin calls," Cuban wrote in the AMA thread. "When that margin call happens, its brutal. They just take your stock, send you a f--k you note and sell your stock at the market price, no matter how low. They just want to get your cash to pay back the loan."

Related Link: MrBeast Bought A GameStop Store For $80K, But Should He Have Bought GME Stock Instead?

3. Rules Benefit Wall Street: The saga playing out in GameStop's stock is not due to manipulation, according to Cuban. But the trading rules are "set to benefit" hedge funds and they have many years of experience "exploiting those rules."

Regardless of the rules, hedge funds will certainly be paying attention to Reddit and other message boards to monitor activity.

4. SEC Is A Mess: The U.S. Securities and Exchange Commission can't be trusted to "do the right thing," Cuban said. The SEC is "built by and for lawyers to be lawyers and win cases rather than do the right thing."

Class action suits against Robinhood and perhaps other brokers will also merely benefit the lawyers.

"There will be class action suits," Cuban wrote. "And you will win. And after legal [fees] you will get your $4.00 settlement check."

5. WSB Has Power: WSB "leveraged the value of community" and next time around the group will be better prepared.

"That said, you will do all this again. You will go after WS and the next time you will be smarter," he wrote. "There was only one thing that messed you all up: RobinHood and the other zero commission brokers that everyone used did not have enough capital to fund the fight. They let you down in a big way."

6. Political Aspirations: Cuban's desire to run for U.S. President in 2024 was shut down -- at least for the time being. When asked if he will run for president, he responded "no."

Photo Credit: Gage Skidmore via Wikimedia.

 

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