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Showing posts with the label GameStop

One share can be shorted multiple times. This needs to stop.

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In light of what happened with Gamestop and AMC's respective stocks, there will be lots of hearings and calls for reforms in short-selling. What I really hope is that predatory hedge funds and their lobbyists don't get their way and undo  SEC rule 204 , which regulates the close out requirements for shorts- i.e. when a short seller is on the hook to actually buy a stock they borrowed.  Currently, short-sellers are forced to deliver on their short sale transaction by no later than the beginning of regular trading hours on the settlement day following the settlement date. The predatory hedge funds will call for this requirement to be relaxed to give short sellers more time to buy the stock and close their positions. They will argue that giving short sellers more time will reduce the rush to buy back the shares and help avoid a short squeeze. Giving them more time will only enable them perform these charades on many more good companies - they almost destroyed Tesla not so long ag...
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Can GameStop benefit from its astronomical valuation?

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By now, you all know how a group of novice traders bested Wall Street elite at their own game and caused stock prices for GameStop, Blackberry, AMC and others to skyrocket. I won't waste time replaying it or discussing it further. What I want to discuss is how the rising stock price affects these companies. Can they somehow benefit from their astronomical valuations to improve their operations and change their destiny? Are they set to flourish?  It's ironic, but the inflated share prices don't affect the day-to-day operations of these companies in the slightest. Take GameStop for example, its shareholders are a lot richer, but the business of selling video games and consoles is unchanged, and it is not coming back to the mall. And it's only a matter of time before AMC and Bed Bath and Beyond go bankrupt.    However, under more normal circumstances, a soaring share price could be cashed in — the company could issue new shares to meet the overwhelming demand and then u...
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SPAC: Why many unicorns won't hop on the SPAC wagon

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2020 has certainly been the year of blank check acquisition companies - or SPACs.  That's how Nikola- the sexy electric truck shop-, Utz - the iconic snacks company- and Virgin Galactic went public earlier in the year. Plus, it's also how electric vehicle makers Fisker, Canoo, and Lordstown Motors announced they will go public. Plus Plus, famous investor Bill Ackman recently took his SPAC (Pershing Square Tontine) public in the largest-ever blank-check IPO (it raised A whopping $4B). The objective is to buy a mature unicorn. Ackman actually said Pershing might buy a “mature unicorn” 6 times in the filing. However not all private companies are psyched about merging with SPACs to go public. Airbnb reportedly turned down an offer to merge with Bill Ackman's SPAC, saying it prefers going public via traditional. Airbnb isn't alone. Snowflake, Slack, Shopify and BigCommerce are other flashy SPACs that declined the backdoor to going public and opted for the front door through...
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The business of calm

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Last week was a long one. The stress of the election coupled with the pandemic has a lot of us looking for ways to relieve anxiety and invest in wellness from the comfort of home. Increasingly, many are resorting to mental health and meditation apps. Calm, a meditation app, topped Apple's health and fitness category on Election Day — and other mindfulness apps like Headspace weren't far behind.  Why are these apps popular? The anxiety-inducing times, along with poor access to mental healthcare and high smart phone penetration are big contributing factors. However, these are not the only ones. For me, the biggest factor is that the companies making these apps have finally figured out that they are content creators and not just app makers. The features that were available through these apps 5 years ago were a lot more rudimentary compared to what we have today, and so was the content. These apps have heavily invested in improving their content. It's telling that the biggest a...
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Bad signs for the epic market rally

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In the previous post, I discussed reasons that the stock market is rising despite the economic devastation of the pandemic. In this post, I’ll discuss ominous signs from the market rally: Top 1% account for most of the gains: The market is very top-heavy. 1% of the stocks in the S&P 500 - Alphabet, Amazon, Apple, Facebook and Microsoft - account for more than a fifth of the S&P 500’s market value. While those tech giants have gained around 40 percent so far this year, the 495 other stocks in the index have collectively lost a few percentage points. This is bad because the US workforce is concentrated in the other 99% of the stocks. Insider selling is booming: Some leaders of corporate America are skeptical about the sustainability of this rally and are rushing to cash out. According to CNN Business and TrimTabs Investment Research, insiders have dumped more than $50 billion worth of shares since the start of May. The same source also notes that August is on track to be the thi...
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