On November 23, 2015, Michael Burry attends the New York premiere of “The Big Short” at the Ziegfeld Theater in New York City. Getty Images | Jim Spellman | WireImage According to Barron’s, “The Big Short” investor Michael Burry believes Reddit-favored meme stocks are headed for a crash similar to the dot-com and housing market booms of past decades. “I’m not sure when meme stocks like this will crash, but I don’t think we’ll have to wait long,” Burry told Barron’s. “I believe the retail audience is completely committed in this idea, and Wall Street has grabbed on the coattails.” He went on to say, “We’re running out of new money available to hop on the bandwagon.” As detailed in the popular book and film, Burry was one of the first investors to recognize and profit from the subprime mortgage crisis. He made waves in 2019 when he revealed that he was long GameStop, but that he sold his position in the fourth quarter of last year, just before the meme craze in January. According to Barron’s, he believes that the speculative trading that keeps these meme stocks afloat would eventually harm regular investors. In January, GameStop made Wall Street history with a massive short squeeze that sent the stock up 400% in a week. On Reddit’s WallStreetBets site, where ordinary traders attempted to push stock prices higher and squeeze out short-selling hedge funds, the video game store became a celebrity. Last month, the trading frenzy resurfaced as Reddit traders continued to pour money into their favorite meme stocks, such as GameStop, AMC Entertainment, and others. While the enthusiasm has subsided recently, these stocks have nevertheless risen by unfathomable amounts. In 2021, GameStop has increased by more than 1,000%, while AMC has increased by more than 2,500%. According to a recent Morgan Stanley analysis, retail investors currently account for around 10% of all trades in the market. Although this figure has decreased from the third quarter of 2020, when retail investment accounted for 15% of all trades due to pandemic-induced retail engagement, it remains in the 82nd percentile. GameStop has used its big rally to obtain more financing in order to speed up its e-commerce revolution. The video game store announced last week that it has sold an additional 5 million shares, raising $1.13 billion in capital. This comes after the company raised $551 million in April from the sale of 3.5 million new shares. Burry told Barron’s, “This is a Godsend for these companies.” The complete Barron’s piece may be found here. — Yun Li and Maggie Fitzgerald of CNBC contributed to this story. Have you found this article to be interesting? For unique stock recommendations, investment ideas, and access to the CNBC worldwide livestream, visit www.cnbc.com. Become a CNBC Pro subscriber. Begin your risk-free trial now./n
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