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GameStop and AMC’s Unprecedented Stock Prices, Explained

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  • 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)

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6 Dr. Seuss Books Won’t Be Published Anymore Because of Racist Imagery

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  • Six Dr. Seuss books will no longer be published because they “portray people in ways that are hurtful and wrong,” Dr. Seuss Enterprises announced Tuesday.
  • The late author’s company said the decision was made last year after months of feedback from audiences, teachers, and other specialists in the academic field. 
  • However, many school districts and groups have moved away from Dr. Seuss for years because of racist stereotypes and insensitive imagery in some of his work.

Production of Six Offensive Books To End

Six Dr. Seuss books will stop being published because of racist and insensitive imagery, the business that preserves and protects the author’s legacy said Tuesday.

The list of books blocked from production are:

  • “And to Think That I Saw It on Mulberry Street”
  • “If I Ran the Zoo”
  • “McElligot’s Pool”
  • “On Beyond Zebra!”
  • “Scrambled Eggs Super!”
  • “The Cat’s Quizzer”

“These books portray people in ways that are hurtful and wrong,” Dr. Seuss Enterprises wrote in its announcement letter. “Ceasing sales of these books is only part of our commitment and our broader plan to ensure Dr. Seuss Enterprises’s catalog represents and supports all communities and families.”

Examples of Offending Content

A 2019 study published in the journal “Research on Diversity in Youth Literature,” looked at 50 books by Dr. Seuss and found 43 out of the 45 characters of color have “characteristics aligning with the definition of Orientalism,” or the stereotypical, offensive portrayal of Asia. It added that the two “African” characters both have anti-Black characteristics.

The study even pointed to specific examples. “In (“The Cat’s Quizzer”), the Japanese character is referred to as ‘a Japanese,’ has a bright yellow face, and is standing on what appears to be Mt. Fuji,” the authors wrote.

It also pointed to “If I Ran the Zoo” as an example of Orientalism and White supremacy.

“The three (and only three) Asian characters who are not wearing conical hats are carrying a White male on their heads in ‘If I Ran the Zoo.’ The White male is not only on top of, and being carried by, these Asian characters, but he is also holding a gun, illustrating dominance,” the study authors wrote. “The text beneath the Asian characters describes them as ‘helpers who all wear their eyes at a slant’ from ‘countries no one can spell.'”

The study also argues that since the majority of human characters in Dr. Seuss’ books are White, his works center Whiteness and thus perpetuate White supremacy.

Academic Groups Move Away From Seuss

The company told the Associated Press that the decision was made last year after months of feedback from audiences, teachers, and other specialists in the academic field.

Still, it’s worth noting that it also comes a week after a school district in Virginia made headlines for allegedly banning books written by Dr. Seuss, whose real name is Theodor Seuss Geisel.

The district eventually clarified that it was not banning his books. Instead, it said it was discouraging the connection between Dr. Seuss and “Read Across America Day,” which falls on the author’s birthday: March 2.

The decision to move away from Dr. Seuss books is not actually an uncommon move. School districts across the country have been doing the same.

The National Education Association, which founded “Read Across America Day” and deliberately aligned it with Dr. Seuss’ birthday, is included in that shift.

According to AP News, it’s been deemphasizing Seuss for years now and encouraging a more diverse reading list for kids.

While many have applauded Dr. Seuss Enterprises’ decision, others noted that it will continue to publish more popular books that have received criticism, including “The Cat in the Hat.”

For now, the company said it’s “committed to listening and learning and will continue to review our entire portfolio.”

See what others are saying: (CNN) (Deadline) (AP News)

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Nike Exec Resigns After Bloomberg Reveals Her Connection To Son’s Sneaker Resale Business

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  • Nike Executive Ann Hebert has voluntarily resigned from the company after it was revealed that her son used her credit card to purchase more than $100,000 worth of new shoes for his shoe-resell business.
  • The connection was first noticed by Bloomberg reporter Joshua Hunt, who was working on a profile of Hebert’s son, Joe. 
  • According to a Nike spokesperson, Hebert disclosed the relevant information about her son’s business to the company and hadn’t violated company policy. 
  • Still, Hunt’s report led to swift condemnation for Hebert, with many believing she had used her position to help her son scalp shoes. 

Nike Exec Resigns 

Nike Executive Ann Hebert voluntarily resigned Monday after Bloomberg exposed her connection to her son’s sneaker flipping business last week.

The report, published on Feb. 25, follows 19-year-old Joe Hebert and details how he spent more than $100,000 buying new shoes to resell at his business, West Coast Streetwear. In the article, reporter Joshua Hunt noted that types of shoes Joe bought would sell out in hours and that for people like him, “The sneaker market… is a lot like playing the [stock] market.”

“In the hours after siphoning up stock from retailers, they essentially sell short-term futures based on street sentiment,” Hunt said. 

While scalping is a controversial enough practice on its own, near the end of the article, Hunt notes an unusual connection.

“At one point in late June… [Joe] phoned me, and the number was identified as belonging to Ann Hebert,” Hunt said. “I looked the name up and discovered there was an Ann Hebert who’d worked at Nike for 25 years and had recently been made its vice president and general manager for North America.”

Notably, the April 2020 press release announcing Ann’s new position stated she would be “instrumental in accelerating our consumer direct offense in North America.” That initiative redirected sales from retailers directly to consumers, and as a result, it helped to fuel the resale market. 

“[Joe] Hebert later sent me a statement for an American Express corporate card for [West Coast Streetwear]… and it was in Ann’s name,” Hunt said in his article.

Hunt said he later asked Joe about the connection and while Joe admitted that Ann was his mother, he said she was too high up at Nike to be involved in what he does and that he’d never received inside information, such as discount codes, from her. He then insisted that she not be mentioned in the article and cut off contact.

From there, Hunt reached out to Ann and Nike directly. While Ann didn’t respond, a spokesperson told Hunt that Ann hadn’t violated company policy and that she had disclosed the relevant information about her son’s business to Nike. 

Online Reaction

Ann’s resignation comes amid outrage online, but the reaction to her resignation itself has been mixed. 

There’s been no shortage of criticism against Ann following the announcement of her step down, and she’s even become the butt of a number of jokes. Still, others have defended her. 

“The worst part is that Ann Hebert worked her way up the ladder in a male-dominated industry for 25 years only to be knocked down by her clout-chasing son,” TV host Tamara Dhia tweeted.

Others have said that with everything publicly known so far, they still feel like Ann was in the wrong.

See what others are saying: (Complex) (CNBC) (New York Post)

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Doctors Urge People Not Skip Johnson & Johnson’s COVID-19 Vaccine for Moderna or Pfizer’s

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  • The FDA and CDC approved Johnson & Johnson’s COVID-19 vaccine over the weekend, allowing the company to begin shipping doses Monday for use later this week.
  • Unlike Pfizer and Moderna’s vaccines, Johnson & Johnson’s can be stored at higher temperatures for longer and only requires a single shot. 
  • Still, experts are worried people may try to skip the vaccine for either Pfizer or Moderna’s version since they have higher efficacy rates.
  • Because of this, health officials have stressed that Johnson & Johnson’s vaccine is still highly effective and necessary to keep the U.S. from seeing another rise in daily case rates.

CDC Recommends Johnson & Johnson Vaccine

The Centers for Disease Control and Prevention recommended Johnson & Johnson’s COVID-19 vaccine on Sunday for Americans 18 and older. With that, the first doses of the vaccine began shipping out Monday, and vaccinations are expected to begin sometime this week.

The CDC’s recommendation came one day after the Food and Drug Administration authorized the vaccine for emergency use.

Johnson & Johnson is expected to ship 3.9 million doses this week. By the end of March, it hopes to have shipped a total of 20 million doses.

Johnson & Johnson’s vaccine is also notable for two reasons. First, it doesn’t need to be kept frozen like the Pfizer vaccine and can be kept in a fridge for much longer than the Moderna vaccine. Second, it only needs to be administered once — not twice. 

The approval and recommendation of this vaccine come at a potentially pivotal juncture. Since mid-January, the rate of new COVID-19 infections has been steadily falling; however, for the last week, daily infection rates have begun to plateau.

While it’s undoubtedly good news that the U.S. isn’t once again seeing a rise in cases, as CDC Director Rochelle Walensky explained, this is “a very concerning shift in the trajectory.” 

That’s because it very likely could result in a rise in cases. 

For example, experts worry that the public, as well as state and local officials, may be starting to let their guards down after hearing the news of falling infection rates. Still, those experts have reminded people that Monday marks one year since the announcement of the first coronavirus death in the U.S.

Since then, the U.S. alone has logged more than half a million deaths from this virus.

Johnson & Johnson Vaccine Efficacy 

The addition of the Johnson & Johnson vaccine has the capacity to help keep infection rates from climbing once more, but that doesn’t mean there won’t be some challenges. 

In fact, a major concern now seems to be around the effectiveness of the vaccine.

Notably, in late-stage trials, it was 85% effective against severe cases of COVID-19, with no deaths or hospitalizations being reported in the month after participants received the vaccine. It was also found to be around 72% effective at preventing moderate infections. 

Still, that’s less than the 94% and 95% efficacy rates for the Moderna and Pfizer vaccines, respectively. 

Because of that discrepancy, some health officials have begun to worry that people will try to skip the Johnson & Johnson vaccine in favor of the other two. 

As a result, experts are assuring the public that Johnson & Johnson’s vaccine is still highly effective. They’ve also noted that the studies for the three different vaccines happened at different stages of the pandemic and in different environments. 

“They were compared under different circumstances,” Dr. Anthony Fauci, director of the NIAID, said. “All three of them are really quite good, and people should take the one that’s most available to them… people need to get vaccinated as quickly and as expeditiously as possible.”

See what others are saying: (The Washington Post) (Reuters) (CNN)

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