- 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)
Tesla Suspends Bitcoin Purchases Over Environmental Impact, Causing Coin’s Value To Crash 20%
- Tesla CEO Elon Musk said Wednesday that his electric vehicle company would be ceasing all Bitcoin sales effective immediately, even though it just started using the cryptocurrency in March.
- The announcement prompted a massive sell-off of Bitcoin, which plunged almost 20% on Wednesday.
- In his statement, Musk said, “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
- Many have since accused Musk of manipulating the crypto market since Bitcoin’s environmental impact has long been one of its most controversial facets.
Tesla Suspends Bitcoin Purchases
Volatility is essentially a prerequisite for Bitcoin, but Wednesday proved to be an especially bad day for the cryptocurrency after Tesla CEO Elon Musk announced that the electric vehicle company would no longer be accepting the coin as a form of payment.
At the beginning of the day, Bitcoin was trading for around $57,000. Following Musk’s announcement, it had fallen to a 24-hour low of just over $46,000 — amounting to a nearly 20% drop in value.
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel,” Musk said via Twitter. “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.”
This policy update comes after only months after Tesla disclosed in February that it had bought $1.5 billion in Bitcoin. It also comes after the company began accepting Bitcoin as payment for vehicles in March.
Still, with this sudden about-face, Musk said, “Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy. We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy/transaction.”
Bitcoin’s Environmental Impact
Musk tweeted a graph Thursday morning from Cambridge’s Centre for Alternative Finance that shows Bitcoin’s increasing energy use since 2016.
In March, researchers with the Centre reported that Bitcoin’s energy consumption has jumped 80% since the beginning of 2020.
Bitcoin’s impact on the environment has long been a subject of debate since mining it takes excessive amounts of electrical energy, but that problem has only gotten worse with the coin’s continued growth.
On Monday, Ars Technica reported that a defunct coal power plant in upstate New York has been restarted to mine Bitcoin. In January, Iranian officials partly blamed Bitcoin for mass blackouts in the country. Researchers have even found that Bitcoin mining uses more energy than places like Argentina, a country with 45 million people.
Is Musk Manipulating the Market?
The overall reaction to Musk’s announcement was less than favorable, with many accusing the billionaire of manipulating the crypto market.
“[This is] the same guy who’s been pulling the levers on crypto and has everyone following his every move,” Dave Portnoy, the controversial owner of Barstool Sports, said. “He’s sending Dogecoin up. He’s sending Bitcoin down. This is bullshit.
“Elon, you have responsibility when one second you say to buy something and the next second you don’t,” Portnoy added. “That’s playing with people’s futures, their fortunes.”
Others made similar statements accusing Musk of essentially controlling Bitcoin prices, with MMA fighter Keith Berry saying, “Elon is a smart cookie, do you really think he didn’t know about energy usages on #Bitcoin after he bought 1.5B in BTC in December 2020”
Still, some argued that recent disappointment in Musk is good for Bitcoin in the long term.
“This is great for #Bitcoin,” one person tweeted. “It should never depend on the thoughts and opinions of a single entity. The Elon Musk effect is being priced out and that’s positive for the cryptocurrency industry in the long run.”
See what others are saying: (Reuters) (CNBC) (The New York Times)
U.S. Gas Prices Hit $3 Per Gallon, a 7-year High, as Buyers Panicked During the Colonial Pipeline Shutdown
- The national average gas price has climbed above $3 for the first time in seven years.
- The increase comes as the country’s largest fuel pipeline remains largely shuttered for the sixth day in a row following a ransomware attack, leading to panic buying and massive gas shortages in some cities.
- Energy Secretary Jennifer Granholm said the company behind the pipeline should be able to make a decision on a full restart of the system by the end of Wednesday.
- Still, she cautioned that it will take several days for fuel supplies to go back to normal.
Update: Colonial Pipeline restarted operations at 5 p.m. EST Wednesday. “Following this restart it will take several days for the product delivery supply chain to return to normal,” Colonial said in a statement. “Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions during the start-up period.”
Panic Buying Drives Fuel Shortages
The national average gas price reached $3.008 Wednesday, its highest value in seven years.
The jump is largely being driven by two factors. The first is that the country’s largest fuel pipeline was forced to shut down last Friday following a ransomware attack by the criminal gang Darkside. That pipeline, owned by the Colonial Pipeline Company, stretches from Texas to New York and supplies 45% of the East Coast’s fuel.
The second is that panic buying related to the shutdown and fears of fuel scarcity have exacerbated the problem. In fact, Tuesday evening, over 1,000 gas stations in the Southeast ran dry.
By Wednesday, the situation was even worse. Nearly a quarter of all stations in North Carolina were out of gas, and in urban areas like Charlotte, 71% of stations were empty. Meanwhile, around 15% percent of stations in both Georgia and Virginia were out of gas, and in the Atlanta metro area, 60% of stations had been depleted.
Photos and video from affected states show hours-long lines. Some people have reported waiting more than five hours to get to the pump. Others have shared images of “out of fuel” signs. Stretching pumps even thinner are reports that many drivers are simply trying to top off mostly-full tanks or gas cans.
In one tense situation captured at a gas station near Raleigh, North Carolina, a woman can be seen spitting on a man and hitting a car after she reportedly tried to cut the line. The man fires back a spit of his own, leading to a fight between the two.
When Will the Pipeline Be Back?
On Monday, some (but not most) of the pipeline was brought back manually. Colonial Pipeline officials have also said they hope to restart most operations by the end of the week.
Energy Secretary Jennifer Granholm also told reporters Tuesday that Colonial should be in a position to make a decision on a full restart by the end of Wednesday; however, it’s likely going to take several days for fuel supplies to return to normal even after operations recover.
“Much as there was no cause for, say, hoarding toilet paper at the beginning of the pandemic, there should be no cause for hoarding gasoline,” Granholm said.
Many analysts have echoed that warning, telling people to fuel up only if they need to and asking them to try to conserve as much gas as possible until the pipeline becomes largely operational again.
The governors of Florida, Virginia, North Carolina, and Georgia have all declared states of emergency to try to stave off shortages and keep gas prices down.
See what others are saying: (The Washington Post) (USA Today) (MarketWatch)
GLAAD Report Finds All Top Social Media Platforms “Effectively Unsafe” for LGBTQ+ Users
- The LGBTQ+ media monitoring organization GLAAD said in a Sunday report that Facebook, Twitter, YouTube, Instagram, and TikTok are all “effectively unsafe for LGBTQ users.”
- Of the 64% of respondents who told GLAAD they’ve faced anti-LGBTQ+ hate speech or harassment online, 75% said at least some came from Facebook, which performed the most poorly of all five platforms.
- The report highlights more than just hate speech, as GLAAD notes that “inadequate content moderation, polarizing algorithms, and discriminatory AI” also negatively affect LGBTQ+ users.
- “This is about less watchdogging, more partnering with these platforms to get it right,” GLAAD CEO Sarah Kate Ellis said while calling the report a starting point for how platforms can change.
Anti-LGBTQ+ Hate Speech Rampant on Social Media Sites
The LGBTQ+ media monitoring organization GLAAD has published a report that classifies every top social media platform as “effectively unsafe for LGBTQ users.”
That includes Facebook, Twitter, YouTube, Instagram, and TikTok.
“Of special concern, the prevalence and intensity of hate speech and harassment stands out as the most significant problem in urgent need of improvement,” GLAAD said in the report released Sunday.
The organization noted 64% of LGBTQ+ social media users have experienced harassment and hate speech online, which it said is higher than all other identity groups.
Of the five platforms, Facebook was far and above the worst offender. In fact, GLAAD reported that 75% of the LGBTQ+ respondents who’ve experienced online harassment said at least some of that harassment happened on Facebook.
Meanwhile, 24% percent of respondents said they have faced similar harassment on Twitter and Instagram each. YouTube came in just below those figures at 21%, and TikTok saw the lowest harassment level of the five at 9%.
GLAAD’s president and CEO, Sarah Kate Ellis said that while the organization was originally going to give each platform a grade, “What we ended up realizing is that if we started grading, they’d all fail, quite frankly.”
Content Moderation and AI
It’s not just hate speech. “Inadequate content moderation, polarizing algorithms, and discriminatory AI” were also listed among the specific problems that GLAAD hopes these social media platforms will address.
The organization even listed several “urgent recommendations,” which read:
- “Stop allowing algorithms to fuel extremism and hate. Similarly, confront the problem of bias in AI.”
- “Make it easier for users to report problematic content, be transparent in content moderation, and use more human moderators.”
- “Employ a dedicated LGBTQ policy lead.”
- “Respect data privacy, especially where LGBTQ people are vulnerable to serious harms and violence.”
It also called for platforms to more strongly enforce misinformation labels and restrict hashtags/shares of anti-LGBTQ content.
“This is about less watchdogging, more partnering with these platforms to get it right,” Ellis said, summing up the purpose of the report as a “roadmap” for platforms to begin implementing change.