Dave Portnoy just taught America one of the most important phrases on Wall Street

  • On Wall Street there’s a term for the last people to sell out of a crappy stock.
  • Those people are called “bag holders,” and they take heavy losses on their investment.
  • An example: Bar Stool founder Dave Portnoy is a bag holder. He lost $700,000 trading GameStop.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit the Business section of Insider for more stories.

Pour one out for Barstool Sports founder Dave Portnoy. After cheering their meteoric rise, he sold his position in “meme stocks” like AMC and GameStop on Tuesday at a $700,000 loss, and in the process taught America one of the most important phrases on Wall Street: bag holder.

A bag holder is someone who is left holding a stock (or bond, or any security) as it is declining in value. It means they will have to sell the security at a loss after many, many other much savvier people already sold their shares.  It means they will almost certainly lose a lot of money.

You see, Portnoy and his WallStreetBets friends on Reddit are not the only ones who can meme.

There’s no crying in bag holding

What makes Portnoy the baggiest of bag holders is not just the money he lost, it’s the stupid way he lost it and all the whiny noise he made on the way.

When GameStop’s stock screamed up from from $17 at the beginning of January to its high of almost $400 on the backs of the Reddit-fueled rally, Portnoy told anyone who will listen that he would never sell the stock. He told Fox News, and CNN, he told his followers on Twitter and Instagram. He made fun of people who told him the fundamentals of financial analysis showed that the stocks he championed were extremely overpriced. He scoffed at the idea that he was part of a bubble.

And yet, according to Portnoy, he “bought at the absolute high” for GameStop, AMC, and Nokia — another meme stock — and “sold at the exact bottom.”

Read more: The Reddit traders driving up the price of GameStop are not what you think they are

He also demonstrated that he had absolutely no earthly idea what he was doing, or how anything on Wall Street works. Last Thursday, brokerage app Robinhood paused trading in the meme stocks to recapitalize. It had allowed traders on its app to take on so much risk that it was forced to raise more money to meet regulatory requirements.

But Portnoy and his paranoid stock junky friends on Reddit insisted that this was Robinhood’s attempt to help the hedge fund managers that they had already blown up in this trade, like Melvin Capital which lost 53% in January, largely due to its bet against GameStop.

Portnoy whined to an indignant Tucker Carlson on Fox News Thursday night that he was being oppressed by the Wall Street machine. When Carlson informed him that Robinhood actually makes money by selling order flow (its customer’s trading data) to Citadel (a securities firm that shares a parent company with a hedge fund that gave Melvin a cash injection as it got slammed), he looked like he was going to burst into tears.

Read more: This GameStop thing isn’t funny; it’s stupid

Of course, Robinhood’s relationship with Citadel Securities is not a secret. Everyone on Wall Street knows that this is Robinhood’s business model. It’s how the app is able to provide no-fee trading to its users (you know what they say about “free”). Everyone also knows that the more risk Robinhood takes on — the more wildly Portnoy and his friends trade — the more capital Robinhood will have to have on hand to meet regulatory requirements.

Please for the love of God read a book

On Monday night, just before he capitulated, Portnoy again claimed he would never sell his meme stocks.  But what was truly stunning about Portnoy’s interview with CNN’s Chris Cuomo was his inability to accept that he simply didn’t understand the rules of the game he was playing.

He stood firm in the idea that any rational person who experienced the pause in trading he experienced would believe there was a conspiracy afoot. In one breath he claimed he understood why Robinhood needed to pause trading, and in the next he was spitting out delusional conspiracy theories again. He claimed no one could have known about Robinhood’s capital requirements (aside from, of course, everyone on Wall Street or anybody who cares to take even a little time to figure out what they’re talking about).

It was a near-Trumpian inability to accept reality.

About 12 hours after his CNN interview — in a tweet announcing that he sold his meme stocks — Portnoy whined that the CEO of Robinhood should be in jail.

Any Wall Streeter will tell you: Insisting that losing money in the stock market is everyone’s fault but your own is peak bag holder behavior.

Portnoy, of course, will be fine. He is still a wealthy man, and he bet a very small portion of his fortune on meme stocks. He may, however, have fans who listened to him who took on quite a bit more risk.

On Monday, Cuomo had asked Portnoy whether or not he felt responsible for telling his followers to hold on to stocks that Wall Street’s math minds said had very little real value. Portnoy said “no.”

He thinks of the stock market less like a math problem where one needs to learn concepts and apply analysis, and more like casino where you just need to keep playing when you’re on a heater. He told Cuomo he did not feel responsible for turning his faithful Stoolies into bag holders, he insisted that like any gamblers they knew the risks.

But surely some did not. It’s very likely that the majority of people following Portnoy into these meme trades shared his ignorance of how anything on Wall Street works.

In fact, part of the appeal of these “meme trades” is that they are information agnostic. They replace financial analysis and any kind of systemic reasoning with a violent shove from the bowels of the internet. It is unsurprising that some of these traders were (or will be) left flatfooted when the math shoves back. Bag holders are often surprised when all is said and done.

So perhaps — just as a form of apology — it would be a nice gesture if Barstool decreed that the next few Saturdays are for the broke boys.

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