- Shares of GameStop opened at $350 on Wednesday, a massive increase from $4 share prices last summer.
- Meanwhile, shares for the theater chain AMC opened at $20, up from a $2 price point it had averaged over the last month.
- These swings are a direct result of a rebellion by Reddit users against hedge fund companies like Melvin Capital, which has likely lost millions and has already seen a $2.8 billion bailout from this week’s moves in the stock market.
- The stock market’s current volatility has reignited fears that a bubble is forming. It has also stoked discussion around no-fee trading apps, which have radically changed the landscape of how people trade stocks in recent years.
GameStop and AMC Stocks Surge To Record Highs
Shares of GameStop opened at an unprecedented $350 Wednesday thanks to a coordinated online rebellion against hedge fund companies.
That’s a massive departure from GameStop’s share price of $4 in July.
While the stock had steadily increased in value over the last few months, it skyrocketed on Monday, spiking at $140. The same day, GameStop plummeted to around $70 a share, but by the end of Tuesday, shares had once again soared over the $140 mark.
GameStop isn’t the only company seeing exceptional gains. Shares of AMC opened at $20 on Wednesday, which is pretty notable considering shares had been at around $2 for the past month.
Similar spikes have now even bled over into some European stocks.
In fact, trading was so volatile on Wednesday that stocks for companies like GameStop, AMC, and KOSS Corporation were all temporarily suspended multiple times.
What’s Driving These Huge Upticks?
Two processes are primarily driving GameStop’s stock right now: short-selling and short-squeezing.
Short-selling occurs when an investor borrows shares of a stock and then immediately sells those shares. This is actually the opposite of how most people invest in the stock market. Usually, a person buys a share hoping that its value will go up; however, with short-selling, investors are betting that the share price will go down.
For example, say a person borrowed a share that’s $10 and then immediately sold at that price. In essence, they just made $10.
But it’s not quite that simple: since the share was borrowed, it will need to be paid off at some point. Continuing the example, say the borrower decided to wait until the share price dropped down to $7. In that example, the borrower would make $3 once all was said and done.
Keep in mind that this is just a simplified way of explaining short-selling because, on top of this, short-sellers also have to pay fees until they actually buy their borrowed stock.
Main point: Short-sellers tend to put in a lot more than just $10, meaning it can be a risky investing method, especially if they get short-squeezed.
Short-squeezes occur when a specific stock begins to gain money. Using that last example, say the stock price jumped up to $13 instead of down to $7. Also, for the sake of this example, say the stock price is expected to continue rising.
A short-seller might then decide to go ahead and buy that stock at $13. Notably, that’s a loss of $3 per share (plus fees), but if the stock continues to climb higher, it keeps them having to shell out — and thus lose — even more.
Reddit Revolts Against Hedge Fund Short-Sellers
A multitude of short-sellers, including the likes of the hedge fund Melvin Capital, have been betting that stock prices like GameStop and AMC will decrease.
That’s for a number of reasons: the pandemic generally hurting businesses, movie theaters remaining closed, a shift away from hard copies to digital versions of games, etc.
In spite of that, a group of Redditers from the subreddit r/WallStreetBets is now largely driving this unprecedented short-squeeze by buying more and more stocks, forcing short-sellers like Melvin Capital to buy their shares at a loss.
Reuters projects that Melvin Capital has likely lost millions because of this. On Monday, the company also received a $2.75 billion bailout from two billionaire investors in the face of its losses.
As far as why these Redditers are trying to pile on the pressure, there are a few reasons. Superficially, there is a pretty heavy meme component to GameStop and AMC’s volatility. Others simply want to get rich quick.
More notably, however, is the fact that many of them genuinely love GameStop. They want to see it succeed and get back at those betting on its failure.
Connected to that are also arguments like those made by internet entrepreneur Alexis Ohanian, who said, “the public [is] doing what they feel has been done to them by institutions. This is an echo of what we’ve seen social media enable the public to challenge institutions for the last decade.”
“And it’s a perfect storm at a time when lots of people are hurting, interest rates are so low, inescapable student loan debts loom, and every major institution has caught Ls during a /global pandemic/ over the last year. This is something to believe in.”
That said, this opinion has not been shared by everyone.
“Seeing a lot of people laughing about the game stop reddit stock thing and yeah i understand why you might think that’s funny that a hedge fund goes under but what if it was YOUR hedge fund that they were doing it to? not so funny then huh?” reporter Jordan Uhl said on Twitter.
The recent events in the stock market have reignited fears that a bubble (essentially, driving up the value of a stock above its expected value) may be forming. It has also stoked discussion around no-fee trading apps like WeBull and Robinhood, which have radically changed the landscape of how people trade stocks in recent years.
See what others are saying: (Reuters) (CNBC) (The Wall Street Journal)
Google Is Banning “Sugar Dating” Apps as Part of New Sexual Content Restrictions
The change essentially targets apps like Elite Millionaire Singles, SeekingArrangements, Spoil, and tons of other sugar dating platforms.
Sugar Dating Crackdown
Google has announced a series of policy changes to its Android Play Store that include a ban on sugar dating apps starting September 1.
The company’s Play Store policies already prohibit apps that promote “services that may be interpreted as providing sexual acts in exchange for compensation.”
Now, it has updated its wording to specifically include “compensated dating or sexual arrangements where one participant is expected or implied to provide money, gifts or financial support to another participant (‘sugar dating’).”
The change essentially targets apps like Elite Millionaire Singles, SeekingArrangements, Spoil, and tons of other sugar dating platforms currently available for download.
What Prompted the Change?
The company didn’t explain why it’s going after sugar dating apps, but some reports have noted that the move comes amid crackdowns of online sex work following the introduction of the FOSTA-SESTA legislation in 2018, which was meant to curb sex trafficking.
That’s because FOSTA-SESTA created an exception to Section 230 that means website publishers can be held liable if third parties are found to be promoting prostitution, including consensual sex work, on their platforms.
It’s worth noting that just because the apps will no longer be available on the Play Store doesn’t mean the sugar dating platforms themselves are going anywhere. Sugar daters will still be able to access them through their web browsers, or they can just sideload their apps from other places.
Still, the change is likely going to make the use of these sites a little less convenient.
See what others are saying: (The Verge)(Engadget)(Tech Times)
Activision Blizzard CEO Apologizes for “Tone Deaf” Response to Harassment Suit, Unsatisfied Employees Stage Walkout
Organizers of a Wednesday walkout say they “will not return to silence” and “will not be placated by the same processes that led us to this point.”
After a week of growing criticism against its workplace culture, the CEO of Activision Blizzard has finally apologized for how the company first responded to allegations of sexual harassment and assault in its offices.
“Our initial responses to the issues we face together, and to your concerns, were, quite frankly, tone deaf,” CEO Bobby Kotick said Tuesday in a letter to employees. “It is imperative that we acknowledge all perspectives and experiences and respect the feelings of those who have been mistreated in any way. I am sorry that we did not provide the right empathy and understanding.”
In its initial response, Activision Blizzard denounced the disturbing allegations brought forth in a lawsuit by the California Department of Fair Employment and Housing (DFEH) as “irresponsible.” The company added that it came from “unaccountable State bureaucrats that are driving many of the State’s best businesses out of California.”
But many current and former employees soon disputed that claim. In fact, at the time, more than 2,500 had signed their name to an open letter condemning the company for its response, which they described as “abhorrent and insulting” to survivors.
In his letter, Kotick promised employees that Blizzard will take “swift action to be the compassionate, caring company you came to work for.”
As part of a series of new policies, he said the company will now offer additional employee support and listening sessions, as well as potential personnel changes to leadership.
“Anyone found to have impeded the integrity of our processes for evaluating claims and imposing appropriate consequences will be terminated,” he added.
Kotick also said Blizzard will add “compliance resources” to ensure that leadership is adhering to diverse hiring directives.
Lastly, he promised that the company will remove “inappropriate” in-game content. In a similar statement on Tuesday, Blizzard’s World of Warcraft team said it’s actively working to remove “references that are not appropriate for our world,” though it didn’t specify what those references were.
It now appears that many of the references being removed are of the game’s former Senior Creative Director, Alex Afrasiabi, who is cited in the lawsuit as someone who hit on and made unwanted advances at female employees. Moreover, the suit also directly accuses him of groping one woman.
“Afrasiabi was so known to engage in harassment of females that his suite” during company events “was nicknamed the “[Cosby] Suite” after alleged rapist Bill [Cosby],” the suit claims.
Organizers of a company-wide employee walkout, which was announced Tuesday and occurred Wednesday, still argue that Kotick’s latest message doesn’t address their larger concerns.
Among those are “the end of forced arbitration for all employees,” “worker participation in oversight of hiring and promotion policies,” “the need for greater pay transparency to ensure equality,” and “employee selection of a third party to audit HR and other company processes.”
“We will not return to silence; we will not be placated by the same processes that led us to this point.”
Ahead of the walkout, Blizzard reportedly encouraged its own employees to attend, saying those workers would face no repercussions and “can have paid time off” during the demonstration, according to The Verge.
Frito-Lay Workers End Nearly Three-Week Strike After Securing Higher Wages and a Guaranteed Day Off
Employees also negotiated an end to “suicide shifts,” which are two 12-hour shifts that are only eight hours apart.
Hundreds of Frito-Lay workers in Kansas have put an end to their nearly three-week strike over alleged mandatory overtime assignments that resulted in extremely long work weeks and so-called “suicide shifts.”
The term “suicide shift” refers to working two 12-hour shifts with only eight hours of rest in between. That can be especially hard on employees who claim to have worked up to 84 hours in a single week. For context, that’s 12 hours a day without a single day off.
One of the reasons workers have found themselves taking on more hours and days at plants is because consumer snacking has increased during the pandemic — so much so that Frito Lay’s recent net growth has exceeded every single one of its targets. That’s why at one point, the striking workers asked consumers to boycott Frito-Lay products in a show of solidarity.
The strikes began July 5 and concluded on July 23 following an agreement reached by union leaders and PepsiCo., Frito-Lay’s parent company. Under that deal, all employees will see a 4% wage increase over the next two years. They’ll also be guaranteed at least one day off a week, and the company will no longer schedule workers with only eight hours off between shifts.
Following the agreement, Anthony Shelton, the president of the union representing the workers, said that they’ve “shown the world that union working people can stand up against the largest food companies in the world and claim victory for themselves, their families and their communities.”
“We believe our approach to resolving this strike demonstrates how we listen to our employees, and when concerns are raised, they are taken seriously and addressed,” Frito-Lay said in a statement. “Looking ahead, we look forward to continuing to build on what we have accomplished together based on mutual trust and respect.”
The Long, Bitter Road to an Agreement
When the workers went on strike, they lobbed several very disturbing accusations against Frito-Lay.
In fact, the workers were pushed so hard that according to one employee who wrote in the Topeka Capital-Journal, “When a co-worker collapsed and died, you had us move the body and put in another co-worker to keep the line going.”
While Frito-Lay dismissed this account as “entirely false,” other employees continued to protest conditions in the plants. Many even argued the 90-degree temperatures they had to stand in to protest outside were preferable to the 100-degree-plus temperatures and smokey conditions in the factories.
During the strikes, PepsiCo. actively disputed that its employees are overworked, describing their claims as “grossly exaggerated” and saying, “Our records indicate 19 employees worked 84 hours in a given work week in 2021, with 16 of those as a result of employees volunteering for overtime and only 3 being required to work.”
It also said an initial concession more than met the striking employees’ terms, but the union backing those workers disagreed, and further negotiations were held until the final deal was reached.