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Robinhood should 'never, ever' be called a meme stock: Retail trader

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Matt Kohrs, YouTube Host, talks about new meme stock Support.com's surge following a monster rally, and why he would never call Robinhood a meme stock.

Video Transcript

- Welcome back to Yahoo Finance Live. Shares of support.com extending their gains in the session. It is up nearly 50% now, after soaring well over 30% on Friday. The latest meme trade is now on track for its eighth straight day of gains. And we should point out the stock is up well over 200% just in the last week. Let's bring in YouTube host Matt Kohrs, along with Yahoo Finance's Ines Feray to discuss the very latest moves. And now we should point out, you were in on support.com. You sold last week. Walk me through your thinking here. What do you think has driven the gains? Why did you get out on Friday?

MATT KOHRS: Yes, so I think there's a lot of going on with this particular stock. So first of all, very, very high short interest. Right before this show I was kind of looking up the most recent estimated short interest on this one. 72%, which is sky high for a short interest. Beyond that, it's a low float stock. The float is around just over 9 million, 9.3. Utilization is sky high at 95%. So I was thinking of it-- it had all the prerequisites of something that needed to go absolutely crazy. And on top of it, you do have some other things for example, coming up. I believe September 10 there's a merger talk with a Bitcoin mining company to help them go public.

And also, it's on the threshold list. So right here we have the data is a little bit lagging, but as of July 30, about 10% of the free float was on this threshold list. So we had all these FTDs, so something's going on that shouldn't have been going on. And I think that's why it caught the attention of this community. I know you were saying these meme stocks, but it's just, this community who is kind of a little bit more focused on maybe potentially elicit nefarious things going on in the market, and this one caught their attention and it was really, really checking off people's boxes. And then on top of that, when I saw all this and then I saw momentum building up, we had some smaller time frames, the moving averages crossing over the large ones, you could see that it was slowly, but surely building. So I got into the play about two weeks ago.

And then the reason I got out on Friday was-- I mean, I just didn't want to get greedy. It exploded. At one point on Friday it was up 200%. And with that all being said, I still think there's potential. The reason I got out was just because on Friday it traded about 18 times its free float, and in that point, there is a chance that the shorts all covered in the squeeze. And because we're currently running on a two-day settlement cycle, we'll know more information tomorrow if the shares are going to be returned from shorts covering on Friday. If they did not come out on Friday, I strongly believe that this play is alive and well and honestly, we could argue that it is right now. I believe it's up pretty close to 50%, you were just saying, which is absolutely incredible. So I'm just waiting a little bit on the data, but I still think it's very much a real play.

- And Matt, it's Ines here. You were talking a little bit about prerequisites. What are the prerequisites for a meme stock to happen? I mean, how do you spot it? Is it high short interest? Are there catalysts? What does it take for that level of participation from retail traders to take place?

MATT KOHRS: Yeah, and this is where it gets, I guess into the distinction of terminology and all that good stuff. So I can only-- I don't know if I could really speak for the community at large, but my own thoughts. So with this one, obviously, to have a short squeeze, you have to have the high short interest. It's beneficial if it's a lower flow and also, you're looking for high utilization. And there's like certain kicker things like just SPRT I think right now has the cost to borrow over 300%, so it's very difficult to bet against the stock. And with its gain, we obviously know that they're underwater.

For example, at one point on Friday, ALL-- At one point on Friday, literally all call options were in the money. All put options were out of the money. And all the shares that were being represented by the calls in the money, greatly outweighed the entire flow to the company. So you just have these things where it's like against a bunch of gun powder in the keg and you could see an explosion. But with any of this-- and I want to make this clear to everyone listening, just because you have all these, doesn't mean it has to. There's nothing ever, ever guaranteed in the stock market.

But to come back more so to your original question, I-- right now, I'm sure we're talking because of the crazy community AMC and GME, and I do not put this particular stock in this league. The way I think of it with AMC and GME, that's the big differentiator is the community is massive. It's been a community that's been building for over six months now. To me, this is more of-- and it might become that. I don't want to say it's not going to at all, but right now to me, it's just a very strong swing trade. And who knows? You never know what this will become, but I do in my own mind differentiate this type of play versus the AMC and GameStop rhetoric.

- Yeah, Matt. Zach here. I think that that's a pretty key point here because it's confusing. I mean, our list of meme stocks has grown pretty significantly now. We've got a lot of names on there. But when you look at GME and AMC, you used an interesting term to talk about why you got out of support. You said you didn't want to be greedy. And I think that that's kind of something that I said you're kind of confused by when you look at those communities, kind of angry when people kind of take profits in these things and that's investing right?

I mean, how does that differentiate when you do look at AMC and GME, kind of the commitment level of traders in those names that almost get angry at people who exit their positions there because they don't like kind of any pressure in the opposite direction.

MATT KOHRS: Yeah, I definitely hear you and I think that's fair input on the situation, honestly. Because hey, we're all in charge of our own P&Ls. I'm not going to tell anyone they should buy or sell. That's not my job. We're all doing the best we can. But I think an important distinction in this and the way I wire it in my own mind is AMC and GME, I'm in it and I'm going to quote unquote, "diamond hand" it because it's my own stand against some of the things, the loopholes that have continually abused within Wall Street. Well, SPRT, like I said, maybe one day it does become that, but right now it just seems like a really smart trade for me, to me, to help my P&L.

So with that, I think sometimes people on the outside of this AMC and GME world don't understand to a lot of the apes within the community, view the charts as a scoreboard of what's going on and it's much more of a social, cultural, wildfire of like almost like a digital Occupy Wall Street and it's much more beyond just like, OK, the stock going up or down a little bit. While all of these other trades, I view it as like, OK, I'm still going to actively trade them until maybe when they get into that realm. But as of now, I'm just not seeing that same type of community support.

- Yeah, can I ask you one more before we let you go? There was a tweet about Robinhood too and AMC waving goodbye. That's one I don't know how to characterize it. Because you had a lot of people still angry at Robinhood and Hood did see that pop a little bit after it started trading. So I mean, where does that fall in here? Is that a meme stock?

MATT KOHRS: No. So I think some of these other media outlets try to put it in that world. And no one within the community that I'm happily a member of, would ever, ever call Robinhood a meme stock. Right there, there's so much animosity still built up from what happened in late January, and I get it. I know that a lot of brokerages stop the purchasing of GameStop at that time, AMC, NOK, BB, the list does go on. But at that point, it was so-- the way the PR was handled was very poor. It rubbed a lot of people the wrong way. And on top of it, it's just the opposite of the mythological story of Robinhood and it felt like they were doing the opposite. It felt like they were robbing from the poor and giving to the rich. And right now, even if we really want to dive into the technicals, we don't just have to do it from the narrative.

I mean, most of their money is coming from what, trading Dogecoin and payment for order flow and options and payment for order flow is being looked at as their government right now? They might get rid of it. So when you're telling me a huge percentage of the revenue might just like disappear overnight, I just don't even see that as an investment. But more of the ethos of it, the community is very, very much against Robinhood.

- You heard it here. Robinhood not a meme stock. Matt Kohrs, it's great to have you on. I hope to have you back on the show again. YouTube host Matt Kohrs joining us there, along with Yahoo Finance's Ines Feray.