June 16, 2024

David Dietze, managing principal and senior investment strategist of Peapack Private Wealth Management, spoke with Quartz for the latest installment of our “Smart Investing” video series.

Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.

ANDY MILLS (AM): E*Trade is trying to maybe kick Roaring Kitty off the platform after it’s revealed that he’s held onto his GameStop position with a screenshot of his E*Trade account. What do you think, if you were gonna advise Roaring Kitty right now, what would you do with his share GameStop?

DAVID DIETZE (DD): I would sell. There’s no fundamentals that back up the kind of price that GameStop has run up to. I applaud him for perhaps getting lucky. We don’t know who’s complete track record. We don’t even know who’s backing him. Some of the screenshots are showing what, $116 million of gain stock shares? Is that all his, or is he running a little bit of mini fund that has been funneled into his account? We don’t know for sure that that’s his screenshot. There’s no proof of that. But, certainly, I advise my clients and so forth, don’t get involved in the meme stock frenzy. There’s just no way to use fundamental analysis to determine where the next stop is. Indeed, we’ve seen both AMC and GameStop sell shares into the latest runup because they see a valuation that way exceeds what they think their own shares are worth. They run the company, they would be in the best position to know, and that actually could help them move their business forward by getting this inexpensive capital because the stock price runup. So, you know, in terms of E*Trade, of course, they’re now trying to figure out, well, how do we handle the situation? It sounds like the Roaring Kitty account is on the E*Trade platform. So they’re between a rock and a hard place if they kick him off. I mean, he’s got all these followers. The so-called younger investors. E*Trade has always purported to want to get a foothold into [that] investment world. They’re gonna say, Oh yeah. Stodgy E*Trade, now owned by Morgan Stanley, we’re trying to make money and play with the big guys. And now you kick our leader off the platform. We may take our money and go somewhere else right on down the road. Maybe to TD Ameritrade and Schwab or something like that. That’s the risk they run right now. I’m not sure there’s been any manipulation. It is just a screenshot. There’s no promise that it will go up. There’s no promise that he will hold it for any length of time. It just happens to be what it appears that he has. If in fact, however, that screenshot is false and he doctored the screenshot to show an amount that he’s holding that he really doesn’t hold, now, I think he could run a follow of the law.

Read more: ‘Roaring Kitty’ could get kicked off E*Trade for GameStop stock manipulation

AM: E*Trade’s concern is that it’s a manipulation of reality and therefore pushing people into a particular stock.

DD: Yeah, exactly. So I think Roaring Kitty has potential liability if, in fact, that’s not what he owns. Even though he purports to say he owns it, if it is what he says, and therefore it’s a factual screenshot. I’m not quite sure what the problem is. It’s like, you know, a mutual fund saying we have now accumulated a certain number of shares of Nvidia. It’s just a fact, right? From E*Trade’s point of view, if they are providing a platform for someone who is making non-factual statements on social media, that’s gotta make them uncomfortable. Because people, when they start suing, if things don’t work out, they’ll sue Roaring Kitty. But they also may sue the E*Trade saying they were in a conspiracy. They saw what Roaring Kitty said was in his platform, E*Trade has his account. It wasn’t the same. So maybe they were a party to the whole pulling the wool over people’s eyes.

AM: I see. So if you’re Roaring Kitty, you’re saying, take the money now, get out. Too many people are mad.

DD: Well, absolutely. It appeared earlier this week that he made a fortune, for example, on Monday. The stock price was up 21% and he got over what, $290 million of GameStop in his account because they also held calls, which are gonna go up much faster than the underlying stock. So to me, if you could pocket 290 million, go for it.

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