A stock analyst says Mudrick Capital's AMC purchase and quick sale shows Wall Street insiders are 'preying on the naivete' of meme-stock traders

• Mudrick Capital's purchase and then quick sale of AMC stock shows retail investors aren't the only ones making money during the latest meme stock trading frenzy, said David Trainer, CEO of investment research firm New Constructs.
• Trainer called the hedge fund's quick profit an example of "institutions dunking on retail investors."
• He acknowledged that there are also retail investors profiting from the sale, but says the trading is risky and investors should take profits now.

Mudrick Capital's purchase and subsequent quick sale of AMC stock shows retail investors aren't the only ones making money during the latest meme stock trading frenzy, said David Trainer, CEO of investment research firm New Constructs.

Mudrick Capital sold all its stock in AMC Entertainment Holdings Inc. for a profit on Tuesday, the same day the movie theater chain disclosed the hedge fund had bought $230 million worth of shares, Bloomberg reported. The firm then went as far as to call AMC's stock overvalued in the aftermath. The move didn't sit well with Trainer.

"A blatant example of institutions dunking on retail investors comes from the Mudrick Capital trade," he told Insider. "They bought 8.5 million shares from AMC and turned around and sold it directly to the public for a quick profit."

The meme trading frenzy isn't an example of retail investors "beating" institutions as there are still institutions profiting from this as well. While there are a handful of retail investors getting rich, institutions like Mudrick as well as brokers who collect fees from the trading frenzy are also drawing in money, Trainer said.

"Wall Street insiders are preying on the naivete of retail meme stock traders," Trainer said in an email.

His message for retail investors who've gotten in on the AMC trade?

"Take the gains you've made right now to the bank, don't try to time the market."