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GameStop extends Wednesday gains as Reddit rally reignited

GameStop shares were higher in early trading on Thursday, after more than doubling in Wednesday’s session, as retail investors revived the surge in Reddit-favorite stocks. Other stocks that were higher include AMC Entertainment, Koss Corp., and BlackBerry Ltd.

Video Transcript

MYLES UDLAND: But let's start this morning talking about some of those meme names, the heavily shorted trade that we all got so familiar with at the end of last month. Once again in focus, some casual 70% rise in the shares of GameStop this morning. So let's just talk about this story. And let's start with Ryan Cohen's tweet, guys.

He tweeted a picture of an ice cream cone, a McDonald's ice cream cone with a frog emoji. That was it. That was the whole tweet. There was also the news that CFO Jim Bell would leave the company, which we discussed on the program. There was additional reporting from both Insider and Bloomberg suggesting that Bell had been pushed out of his role over disagreement with Cohen and the activist team.

Julie, none of that really is compelling for why the stock should go up 100% within the last hour. It fills out the story. But it does seem that it's kind of just back to the old, sure, anything can happen with GameStop, right?

JULIE HYMAN: Yeah, and there's the ice cream cone, right?

MYLES UDLAND: Great.

JULIE HYMAN: Which, like-- what? You know, and even people who were the bulls on this thing kind of had the same reaction. And then there was this whole, like, detective game that people were playing. Oh, what does it mean that it's a McDonald's ice cream cone? And what does the frog mean? And it doesn't matter. Nothing matters.

We've had this discussion before. What matters is that people were talking about it and then decided to buy it again because they think it's going to go up. And I mean, I think that all of this, it bears reminding people that this whole narrative of, oh, it's the little guys who are pushing the stock up bears reminding that we don't know who's in the stock, right?

There are most likely people on both sides of the trade who are retail investors and people on both sides of the trade who are institutional investors, things like hedge funds. So just a quick reminder of that. Also just wanted to mention that we heard from Charlie Munger yesterday, who, of course, a long-time Berkshire Hathaway exec, long-time Warren Buffett confidant.

And he spoke yesterday in a Q&A that was livestreamed on Yahoo Finance. And he talked about this idea of meme stocks. And he talked about the idea of Robinhood trading and what sort of has been put forth, this culture that's been put forth. He doesn't have a great view of it. Listen to what he said.

CHARLIE MUNGER: I have a very simple idea on this subject. I think you should try and make your money in this world by selling other people things that are good for them. And if you're selling them gambling services where you rake profits off the top, like many of these new brokers who specialize in luring the gamblers in, I think it's a dirty way to make money. And I think we're crazy to allow it.

JULIE HYMAN: Now, that's probably what you would expect Charlie Munger to say, right? I mean, the whole raison d'etre of Berkshire Hathaway is buy in things-- buy things that you understand and hold them for a long time. So this is pretty much the opposite of that. Still, it's interesting to hear him articulate that in such a way, Brian.

BRIAN SOZZI: Yeah, hey, how can we argue with Charlie Munger? He is really the man. But I do want to go back to that tweet that Myles referenced. Because I don't think it's an ice cream cone. Guys, I think it's actually a whipped cream on you know what. And Ryan Cohen is saying, he is whipped cream, and GameStop is, well, you know what the other side of that equation in fact is.

But I think what you're seeing the market reaction this morning here, it makes sense. Because the read through here is that when you see an activist investor, you go into GameStop, likely probably pushed out Jim Bell, maybe you see these type of other actions in some of these other companies. Because we talked about it yesterday, outside of AMC, all these other executives that these companies have been frozen in their place. We have not heard from them. They have not taken action.

Where's Blackberry's CEO? Where is the CEO of GameStop throughout all of this? They should probably have taken more action to solidify their financial futures throughout this whole craziness. And I think the read through here is that you might see more changes in the C-suites at these companies because of that really-- that frozenness or that lack of action here. And I think that's why you're seeing the GameStop shares trade up here in the early going.

MYLES UDLAND: Well, I will just say--

JULIE HYMAN: That is not an analysis that I saw yesterday, I will say.

MYLES UDLAND: That's why Brian Sozzi is a professional, with that level of allusion around the point he's trying to make. I would just say also, to come back to something we've all learned a lot about, which is stock settlement. Remember, it is 2 plus 2. Two days from yesterday is the end of the trading month.

We certainly know that many, many people said, I now would like to be short shares of GameStop, as it went to 1, 2, 3, $400 per share. When did that happen? That happened at the beginning of this month. When would you like to close out that short?

At the end of this month. And I think there is absolutely a mechanical dynamic here, certainly influenced by what's happening in the options market, that is probably going to be-- and we'll never know likely the full story of who's on what side of all those trades and who got squeezed again. I'm guessing there's probably not another Melvin out there. But certainly someone is flat-footed here because that's the only real reason any stock would double in this short period of time.

And so again, taking some learnings that we all kind of had from the first part of this episode, applying them to future episodes maybe gets us closer to something like what is really going on here. Though, again, hard to really explicate for sure why anything like this would happen in any kind of real company, right?

This isn't-- this is not a penny stock. This is not a made-up coin or something like that. GameStop is a real business that has billions of dollars of sales. And there are real bulls who believe the business will improve.