Leon Cooperman told CNBC on Thursday that he believes the frenzy of negotiations fueled by Reddit involving GameStop shares will end badly. However, the billionaire investor said he was not blaming the people who started the epic selling squeeze, which has taken stocks to dizzying heights in recent days.
“I’m not condemning them. I’m just saying, from experience, that it will end in tears,” Cooperman said in “Fast Money: Halftime Report”, while the video game retailer’s shares fell about 25%. At the start of the session, GameStop’s stock reached a record high of $ 483, but came under pressure because several retail brokers put limits on trading.
Cooperman said he has no position at GameStop. However, at a glance at finances, he said the company’s declining sales do not support such high levels in the current stock price or anything close.
“GameStop isn’t worth $ 500, it’s not worth $ 400, it’s not worth $ 300, it’s not worth $ 200, it’s not worth $ 100, it’s not worth $ 50,” said Cooperman, president of the Omega Family Office. He added that “investors” don’t have GameStop – only “speculators” do.
Cooperman said he believes the current stock market moment – including the online hype of heavily sold stocks – is the result of many factors, including the almost zero interest rates instituted by the Federal Reserve in response to the coronavirus pandemic. He also said that Congress’ fiscal response is playing a role.
“It’s all interconnected,” said Cooperman, the son of a plumber in the Bronx who later became one of Wall Street’s most successful investors. “The reason the market is doing what it is doing is that people are sitting at home, receiving their checks from the government, basically trading without commissions and without interest rates. I’m not saying they are stupid. Show me one guy with a good record consistently, and I’m going to show you a smart guy. “
Last week, Cooperman had warned of “euphoria” in parts of the stock market. GameStop’s shares were trading at less than $ 50 on the day of Cooperman’s comments.
“I have been through cycles like this in the past. This is extreme, even more so, but it must also pass,” said the hedge fund pioneer on Thursday. “Ultimately, the stock market reflects economic progress or a lack of it.” He added: “Water seeks its own level.”