Like many investors, Mark Cuban was thrilled to see GameStop’s stock soaring last week, praising the Reddit community r/wallstreetbets for driving up the price of stocks like $GME, $AMC, and $NOK. So he went to the epicenter of the stonk saga to offer his advice.
On Tuesday, Cuban held a Reddit AMA, answering questions about GameStop stock, the SEC, and Robinhood. For those who don’t know, an AMA (short for “ask me anything”) is where celebrities field random questions from Redditors.
After its initial drop on Monday, Gamestop stock has plummeted 60% as the once-hot stock’s bubble deflates. Cuban offered his views on why the stock is sinking: supply and demand.
“In this case it literally could be because the source of demand has been crippled,” he wrote. “When Robinhood shut it down, then cut it back, let's put aside why, they cut off the greatest source of demand. They created a RobinHood Dive. No RH buyers, means sellers lower their price to find buyers. And they keep on lowering it till they find buyers. Keep the most natural buyers out of the market and the price keeps on FALLING.”
Cuban blamed Robinhood’s lack of cash for the drop. “They just want to get your cash to pay back the loan,” he wrote. “That then accelerates the selling. Which then leads to what we are seeing in the market right now with GME in particular.”
Cuban’s advice? Hold on to what you’ve got. “Why? Because when RH and the other online brokers open it back up to buyers, then we will see what WSB is really made of,” he wrote. “That is when you get to make it all work. I have no doubt that there are funds and big players that have shorted this stock again thinking they are smarter than everyone on WSB.”
Cuban implied that Robinhood may not be the best broker for GameStop stock, and that finding another “with a far, far, far better balance sheet” may ensure trading won’t be cut off prematurely.
Cuban then weighed in on the SEC’s role in the craze, saying he wouldn’t ever trust the agency’s ability to do the right thing “ever.” And he didn’t mince words.
“It's an agency built by and for lawyers to be lawyers and win cases rather than do the right thing,” he wrote. “If the SEC gave a shit about ANYONE other than Wall Street you would be able to go there right now and read bright line guidelines about insider trading, shorting, what is a pump and dump, what are the rules for cutting off the purchase of stocks like happened with GME et al. But they won't. They would rather litigate to regulate, which means they love to sue people in order to create new legal precedents.”
As amateur investors lost thousands in the wake of Robinhood halting trading and stocks plummeting, Cuban had some advice for those who didn't win big: look to Bitcoin investors.
“BTC HODLers are a great example to follow,” he wrote. “Many bought at the highs in 2017 and watched it fall by 2/3 or more. But they held on because they believed in the asset. The same applies to stocks. When I buy a stock I make sure I know why I'm buying it. Then I HODL until I learn that something has changed. The price may go up or down, but if I still believe in the logic that made me buy the asset, I don’t sell. If something changed that I didn't expect, then I look at selling.”
Cuban’s central message for traders was to be patient. “Disruption is never easy or straight line,” he wrote. “Is what you believe in still true? If it is, stay with it. If it's not, figure out what changed, learn from it and reload for the next asset. As always DO THE WORK. Assets including stocks move for a lot of different reasons. Trading stocks isn't easy. Trading Crypto, NFT, whatever, isn’t easy. None of this shit is easy. You know what it is? It's time consuming and brain consuming. And when you learn share. If you want to beat old school Wall Street you have to share that knowledge and find the power in numbers.”
As he thanked the Reddit community for turning Wall Street upside down, Cuban's final thoughts were optimistic. "No disruption is easy or happens in a straight line," he wrote. "Stay with it. I am a believer."