- 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)
Misinformation Makes Up 20% of Top Search Results For Current Events on TikTok, New Research Finds
According to the report, the app “is consistently feeding millions of young users health misinformation, including some claims that could be dangerous to users’ health.”
Misinformation Thrives on TikTok
As TikTok becomes Gen Z’s favorite search engine, new research by journalism and tech group NewsGuard found that the video app frequently suggests misinformation to users searching for news-related topics.
NewsGuard used TikTok’s search bar to look up trending news subjects like the 2020 election, COVID-19, the invasion of Ukraine, the upcoming midterms, abortion, school shootings, and more. It analyzed 540 videos based on the top 20 results from 27 subject searches, finding false or misleading claims in 105 of those posts.
In other words, roughly 20% of the results contained misinformation.
Some of NewsGuard’s searches contained neutral phrases and words like “2022 election” or “mRNA vaccine,” while others were loaded with more controversial language like “January 6 FBI” or “Uvalde TX conspiracy.” In many cases, those controversial phrases were suggested by TikTok’s own search bar.
The researchers noted that, for example, during a search on climate change, “climate change debunked” showed up. While looking up COVID-19 vaccines, searches for “covid vaccine injury” or “covid vaccine exposed” were recommended.
Dangerous Results Regarding Health and More
The consequences of some of the false claims made in these videos can be severe. NewsGuard wrote in its report that the search engine “is consistently feeding millions of young users health misinformation, including some claims that could be dangerous to users’ health.”
Among the hoards of hazardous health claims were videos falsely suggesting that COVID-19 vaccines are toxic and cause permanent damage to organs. The report found that there are still several videos touting the anti-parasite hydroxychloroquine as a cure-all remedy, not just for COVID, but for any illness.
Searches regarding herbal abortions were particularly troublesome. While certain phrases like “mugwort abortion” were blocked, the researchers found several ways around this that lead to multiple videos touting debunked DIY abortion remedies that are not only proven to be ineffective, but can also pose serious health risks.
NewsGuard claimed that the social media app vowed to remove this content in July, but “two months later, herbal abortion content continues to be easily accessible on the platform.”
Other standard forms of conspiracy fodder also occupied space in top search results, including claims that the Uvalde school shooting was planned and that the 2020 presidential election was stolen.
TikTok’s Search Engine Vs. Google
As part of its research, NewsGuard compared TikTok’s search results and suggestions with Google and found that, by comparison, the latter “provided higher-quality and less-polarizing results, with far less misinformation.”
“For example, searching ‘covid vaccine’ on Google prompted ‘walk-in covid vaccine,’ ‘which covid vaccine is best,’ and ‘types of covid vaccines,’” NewsGuard wrote. “None of these terms was suggested by TikTok.”
This is significant because recent reports show that young Internet users have increasingly turned to TikTok as a search engine over Google. While this might elicit safe results for pasta recipes and DIY tutorials, for people searching for current affairs, there could be significant consequences.
NewsGuard said that it flagged six videos containing misinformation to TikTok, and the social media app ended up taking those posts down. In a statement to Mashable, the company pledged to fight against misinformation on its platform.
“Our Community Guidelines make clear that we do not allow harmful misinformation, including medical misinformation, and we will remove it from the platform,” the statement said. “We partner with credible voices to elevate authoritative content on topics related to public health, and partner with independent fact-checkers who help us to assess the accuracy of content.”
Over 70 TikTok Creators Boycott Amazon as Workers Protest Conditions and Pay
As the company fends off pressure on both fronts, the Amazon Labor Union continues to back election petitions around the country including one filed Tuesday in upstate New York.
Gen Z Goes to War With Amazon
More than 70 big TikTok creators have pledged not to work with Amazon until it gives in to union workers’ demands, including calls for higher pay, safer working conditions, and increased paid time off.
Twenty-year-old TikToker Elise Joshi, who serves as deputy executive director for the advocacy group organizing the boycott, Gen Z for Change, posted an open letter on Twitter Tuesday.
“Dear Amazon.com,” it reads, “We are a coalition of over 70 TikTok creators with a combined following of 51 million people. Today, August 16th, 2022, we are joining together in solidarity with Amazon workers and union organizers through our People Over Prime Pledge.”
Amazon has refused to recognize the Amazon Labor Union (ALU) since workers voted to unionize at a Staten Island warehouse in April, and it has resisted collective bargaining negotiations.
Although the ALU is not involved in the boycott, its co-founder and interim President Chris Smalls expressed support for it in a statement to The Washington Post, saying, “It’s a good fight to take on because Amazon definitely is afraid of how we used TikTok during our campaigns.”
While the ALU posts videos on TikTok to drum up popular support for the labor movement, Amazon has sought to win large influencers over to its side. In 2017, it launched the Amazon Influencer Program, which offered influencers the opportunity to earn revenue by recommending products in personalized Amazon storefronts.
Last May, the company flew over a dozen Instagram, YouTube, and TikTok stars to a luxurious resort in Mexico.
Emily Rayna Shaw, a TikTok creator with 5.4 million followers who has partnered with Amazon in the past, is participating in the boycott.
“I think their method of offering influencers life-changing payouts to make them feel as if they need to work with them while also refusing to pay their workers behind the scenes is extremely wrong,” she told The Post.
“As an influencer, it’s important to choose the right companies to work with,” said Jackie James, a 19-year-old TikTok creator with 3.4 million followers, who told the outlet she will cease doing deals with Amazon until it changes its ways.
The ALU is demanding that Amazon bump its minimum wage to $30 per hour and stop its union-busting activities.
Slogging Through the ‘Suffocating’ Heat
Amazon is also facing challenges from workers themselves, with some walking out this week at its largest air hub in California, where company-branded planes transport packages to warehouses across the country.
They are asking for the base pay rate to be raised from $17 per hour to $22 per hour.
A group organizing the work stoppage under the name Inland Empire Amazon Workers United said in a statement that over 150 workers participated, but Amazon countered that the true number was only 74.
The Warehouse Worker Resource Center counted 900 workers who signed a petition demanding pay raises.
Inland Empire Amazon Workers United has complained about the “suffocating” heat in the facility, saying that temperatures at the San Bernardino airport reached 95 degrees Fahrenheit or higher for 24 days last month.
Amazon spokesperson Paul Flaningan, however, claimed to CNBC that the temperature never surpassed 77 degrees and said the company respects its workers’ right to voice their opinions.
On Tuesday, the ALU backed another warehouse’s decision to file a petition for a union election in upstate New York, roughly 10 miles outside Albany.
The National Labor Relations Board requires signatures from 30% of employees to trigger an election.
See what others are Saying: (The Washington Post (CNBC) (Associated Press)
Twitter Roasts Tim Hortons for Offering Coffee and Donut to Settle Lawsuit for Spying on Customers
The company allegedly tracked app users’ movements 24/7 to determine when they visited a competitor, a major sports venue, or their home or workplace.
A Not So Tasty Compensation
Social media users ridiculed Canadian fast food chain Tim Hortons over the weekend for a leaked email in which it offered to compensate customers whom it allegedly spied on by giving them a free beverage and pastry.
Twitter user James McLeod posted pictures of the email Friday, which was sent to affected users of the company’s app.
“You are receiving this email in connection with a proposed settlement, subject to Court approval, of a national class action lawsuit involving the Tim Hortons app and the collection of geolocation data between April 1, 2019 and September 30, 2020,” it read.
“As part of the proposed settlement agreement, eligible app users will receive a free hot beverage and a free baked good,” it continued. “Distribution details will be provided following approval, in the event that the court approves the settlement.”
The email specified that the free beverage would have a retail value of $6.19 (CAD) plus tax, and the free baked good would be $2.39 (CAD).
In a statement to Vice, Tim Hortons said the settlement is not admission of any wrongdoing and that the allegations in the lawsuits have not been proven in court.
“Add to this the fact that the coffee is absolutely abysmal and it becomes even more hilarious,” one person tweeted amid a flurry of criticism toward the company.
Another added, “Do you think the donut will have the good sprinkles or the bad sprinkles?”
‘Vast Amounts’ of Data Collected Illegally
Suspicion that Tim Hortons had violated its customers’ privacy began in 2020 when a reporter from the National Post found that the company’s app had tracked their location over 2,700 times in under five months.
Last Month, Canadian authorities wrapped up an investigation into the matter, finding that Tim Hortons tracked and recorded the movements of people who downloaded its app every few minutes of every day, even when the app wasn’t open.
Although the app requested permission to access geolocation data, authorities concluded that it misled users to believe it would only gather data while the app was open.
Using “vast amounts” of geolocation data, the company inferred where users lived, where they worked and whether they were traveling, according to investigators.
It even allegedly generated an “event” anytime a user entered or exited a Tim Hortons competitor, a major sports venue, or their home or workplace.
The investigation found that the company continued gathering data for a year even despite having shelved plans to use it for targeted advertising.
The company, which has committed to deleting all geolocation data on group members, said in a statement that it only used the data in a limited way, such as to analyze user trends.