stocks – Techdirt (original) (raw)

For Basically No Reason, Gamestop's Stock Price Is Rollercoastering In A Tug Of War Being Fought On Reddit

from the nonsense dept

Let’s get this straight out of the gate: I am an expert on nothing to do with the stock market beyond my own personal investments. So, absolutely none of this should be taken as any advice or indication that a certain position in any market is being advocated personally by me. This is not a post about where you should invest your money. It is, instead, a post about how silly certain portions of the stock market appear to have become.

And that statement is informed by a decade of watching GameStop, the retailer for new and used video games, new and used video game consoles, and mostly new Funko Pop toys, has been driven further and further from relevance. While predictions about the demise of GameStop have been around forever, recently there is more reason to think they’re going to become true. First, the trend of expanded purchases for digital downloads does away with a hefty chunk of GameStop’s potential revenue. Yes, GameStop offers its own digital download platform… but nobody uses it. In recognition of that trend, the next generation of consoles are being offered with an option to forgo any optical drive entirely, which would be another nail in GameStop’s coffin if widely adopted. And, like most retail operations, the COVID-19 pandemic has severely crippled GameStop’s business.

Which is why those challenges and trends are accurately reflected in GameStop’s stock price, because… oh, wait… shit.

So, yeah, in the month of January, GameStop’s stock has risen roughly 4x. And if you want to try to explain that away, please note that pulling the timeline back further actually makes all of this look way more bonkers.

Okay, so what’s going on here? Did GameStop come up with an entirely new strategy to propel its relevance in the long-term video game industry? Did it totally restructure, coming up with cost-saving measures or store and staffing closures that make it suddenly more profitable? Was there some consequential change of leadership or outside investment in the company?

Nope, none of that. Instead, there appears to be a sort of insane tug of war going on right now on Reddit between short sellers and day traders that is artificially sending this stock on an insane rollercoaster.

Shares of GameStop jumped more than 20% to a high of 101.62shortlyaftertheopenonTuesday.Afterdriftinglowerfromthesessionhigh,thestockturnedsharplyhigherasSocialCapital’sChamathPalihapitiyasaidinatweetthatheboughtGameStopcalloptionsbettingthestockwillgohigher.Tradingwashaltedforasecondtimefollowinghistweetduetovolatility.Thestockwaslastup21101.62 shortly after the open on Tuesday. After drifting lower from the session high, the stock turned sharply higher as Social Capital’s Chamath Palihapitiya said in a tweet that he bought GameStop call options betting the stock will go higher. Trading was halted for a second time following his tweet due to volatility. The stock was last up 21% at around 101.62shortlyaftertheopenonTuesday.Afterdriftinglowerfromthesessionhigh,thestockturnedsharplyhigherasSocialCapital’sChamathPalihapitiyasaidinatweetthatheboughtGameStopcalloptionsbettingthestockwillgohigher.Tradingwashaltedforasecondtimefollowinghistweetduetovolatility.Thestockwaslastup2191 a share.

The explosive rally in GameStop was largely driven by the buying frenzy among individual investors active in online forums, especially the infamous “wallstreetbets” Reddit chat room with more than 2 million subscribers. One trending post on Tuesday features a screenshot of the user’s portfolio showing an over 1,000% return on GameStop’s stock.

In other words, this is like some strange offshoot of a meme stock, where nobody really cares about valuation and mostly only cares about potential. Except, for all the reasons we discussed in the opening, nobody really seems to think that there is any potential here. Instead — and I recognize that this is crazy — a group of traders on the WallStreetBets Reddit appear to be trying to use the power of that chat room to create its own market reality.

With enough small traders rallied to its cause, WallStreetBets can create its own stock market reality, at least for a little while, specifically in cases like GameStop’s where other investors have thrown massive amounts of money behind the opposite bets. “It was a meme stock that really blew up,” WallStreetBets moderator Bawse1 told Wired. “The massive short contributed more toward the meme stock.”

While analysts say the stock hype can’t last, it’s already exposed, once again, just how much of a messed-up casino the stock market can be.

And that’s the problem. This is by no means exactly like 2007 by any stretch, but it does have some of that same stench. Untethering the stock market from the reality of what’s going on with a company is not a good plan. GameStop has headwinds to its survival in the long-term, simply as a matter of its business and where the gaming marketplace is going. What’s going on in the market appears to be chicanery.

Filed Under: forums, short sellers, stock trading, stocks, stonks
Companies: forums, gamestop

from the seems-sketchy dept

We’re all familiar with stock market pump and dump scams that have been around forever, and often show up via spam, but what happens when someone famous gets in on the game. Apparently, rapper 50 Cent started pumping the stock symbol of a penny stock for a company that is distributing a new pair of headphones that he’s associated with. The stock then surged, increasing the company’s value by $50 million. Oddly, when I look at the Twitter account of 50 Cent, I no longer see the Twitter messages in question, which makes me wonder if he realized he might get in trouble for those tweets. Of course, there’s nothing wrong with giving stock advice but if he didn’t disclose his own association with the company, he could run into serious legal problems from both the SEC and the FTC, who have been looking to crack down on “sponsored” tweets that don’t properly disclose a relationship.

Filed Under: 50 cent, ftc, pump, sec, stocks

Congress Critters Invest In Big Companies; News At Eleven

from the not-much-to-glean dept

Red Herring is reporting on the question of where our elected officials invest their own money, noting that an awful lot of it has gone into tech companies. For example, the second, third and fourth most invested in company among Congressional members are Cisco, Microsoft, and Intel, following on GE, which had the largest number of lawmaker investors (88). Of course, the number of investors doesn’t necessarily say how much is invested, as Apple leads on that list, with Congressional members having put somewhere between 6.4millionand6.4 million and 6.4millionand31 million into Apple. Elected officials only need to give a range for their investments, hence the large spread. Of course, all of the info in the article isn’t really all that enlightening, as the companies that these folks are invested in are basically the same as you would find on a list of the biggest companies in the US. So, basically, our Congress critters invest in big companies, many of which are in the tech industry. That’s not particularly surprising.

Filed Under: congress, investments, stocks