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Roaring Kitty to testify on GameStop alongside hedge fund managers

The YouTube streamer known as Roaring Kitty, who helped drive a surge of interest in GameStop Corp, will testify before a House panel on Thursday alongside top hedge fund managers.

The House Financial Services Committee is examining how an apparent flood of retail trading drove GameStop and other shares to extreme highs, squeezing hedge funds like Melvin Capital that had bet against it.

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The witness list was announced on Friday by Congresswoman Maxine Waters and includes Keith Gill, who also goes by Roaring Kitty, Robinhood chief executive Vlad  Tenev, Citadel chief executive Kenneth Griffin, Melvin chief executive Gabriel  Plotkin and Reddit chief executive Steve Huffman.

Ticker Security Last Change Change %
GME GAMESTOP CORP 52.40 +1.30 +2.54%

The virtual hearing, entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide,” will take place on Feb. 18 at 1200 ET (1700 GMT), according to the press release and will be livestreamed here https://financialservices.house.gov/live. Waters, a Democrat, is Chair of the House Committee on Financial Services.

DOJ SUBPOENAS ROBINHOOD, OTHERS IN GAMESTOP PROBE: REPORT

Robinhood, Reddit, Melvin and Citadel have been at the center of the GameStop saga, which saw retail traders promote GameStop on the Reddit forum WallStreetBets. Robinhood emerged as a popular venue to trade the stocks but was criticized for temporarily restricting trading in the hot stock.

WARREN RIPS SEC AMID GAMESTOP SURGE, PUSHES FOR STRICTER WALL STREET REGULATION

The GameStop surge resulted in massive losses for Melvin, after the hedge fund bet the retailer’s stock price would tumble. Citadel’s hedge funds, along with founder Griffin and firm partners, put $2 billion into Melvin.

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Democrats and Republicans are united in their outrage by Robinhood’s decision to suspend trading in the so-called “meme stocks” on Jan. 28. Tenev said the company had to impose the restrictions after wild trading in the stocks triggered a $3 billion margin call by Robinhood’s clearing house, straining the company’s balance sheet.

Massachusetts securities regulators have also issued a subpoena seeking Gill’s testimony.

(Reporting by Michelle Price, additional reporting by Svea Herbst-Bayliss; writing by Megan Davies; Editing by Sonya Hepinstall)

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General Motors settles with California for $5.75M in a win for state pension fund

SACRAMENTO, Calif. — General Motors Co. has agreed to a $5.75 million settlement with California regarding false statements the company made to investors about problems with its deadly ignition switches, state officials announced Friday.

The faulty ignition switches led to at least 124 fatalities and 274 injuries nationwide. The defect also resulted in the recall of more than nine million vehicles in 2014 — one of the biggest recalls in the nation’s history — from the largest U.S. automaker because the switches sometimes caused the sudden termination of electrical systems, including power steering and power brakes.

GENERAL MOTORS TO GO ALL-ELECTRIC BY 2035

In 2015, GM agreed to pay a $900 million settlement to end a U.S. Department of Justice criminal probe, as well as $1 million in 2017 to the U.S. Securities and Exchange Commission for an accounting case. Later that year, the automaker settled with dozens of states for $120 million.

Ticker Security Last Change Change %
GM GENERAL MOTORS COMPANY 53.60 +0.03 +0.06%

GM did not admit any wrongdoing as part of the 2021 agreement with California, and the company’s media representatives did not immediately respond to a request for comment Friday.

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California’s settlement came about because the state’s largest pension system, the California Public Employees’ Retirement System, lost millions of dollars in GM stock. The company knew about the faulty switches in 2005 but failed to report it to federal authorities until 2014, officials said and hid the problems from investors.

Automakers must notify the National Highway and Traffic Safety Administration within five days of finding out about a safety defect.

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“General Motors cheated California twice –- first by concealing a fatal flaw in its vehicles, then by concealing the facts about the flaw in its financial disclosures, which affected the retirement investments of public servants across California,” Attorney General Xavier Becerra said in a statement. “This settlement finally holds GM to account.”

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Cramer calls on U.S. to fund plants to address chip shortage, unemployment

CNBC’s Jim Cramer said Wednesday that the United States should fund the development of a chipmaking compound in efforts to address both the nation’s high unemployment rate and a chip shortage that’s affecting American businesses.

More and more companies, including carmakers like Ford and General Motors, have recently sounded the alarm about the global supply of components, leading them to reduce the production of their own products.

Meanwhile, the U.S. labor market with a 6.3% unemployment rate is struggling to gain traction climbing out of the coronavirus-induced recession.

“We need more chips and we need more jobs,” Cramer said on “Mad Money.” “Why not kill two birds with one stone? It’s time for our government to invest in building the biggest and best complex of semiconductor foundries … in the world.”

Automobiles are becoming increasingly more technologized, which requires silicon chips for things like power steering, brake sensors and entertainment devices. The scarcity of supply has forced GM and Ford to shut down factories, delaying delivery of new cars. GM warned the disruption could impact its 2021 goals.

Demand for chips, which are also used in products like televisions, game consoles and computers, has soared during the pandemic as Americans transitioned to remote work and learning environments. Cramer also pinned the blame on globalization, which allowed companies to outsource manufacturing to giants like Taiwan Semiconductor and Samsung Electronics in Asia.

The more connected cars become, the more semiconductors they will require.

“Believe me, you’re going to start hearing about this shortage constantly, daily, because it’s wreaking havoc with all sorts of industries, and making us a much less competitive and perhaps even hostage company. Hostage to a bigger chip customer, the PRC (China). We got to get ahead of this.” Cramer said.

“Our companies can’t get enough chips because there’s not enough production worldwide, and that lack of chips is hurting all sorts of manufacturing,” he added.

He signaled that he is optimistic on Gina Raimondo, the governor of Rhode Island who was nominated by President Joe Biden to lead the U.S. Department of Commerce. Raimondo is a former venture capitalist, giving her an ideal perspective of the business world, Cramer said.

He also said the low-interest-rate environment can be a catalyst to help fund the federal project with bonds.

“America’s best tech industry, the most intellectual property that is anywhere in tech, is in the semiconductor capital equipment space,” Cramer said, pointing to companies like Lam Research, KLA Tenor and Applied Materials who have machines needed for making chips.

“Meanwhile, building gigantic semiconductor foundries can put more people to work than just about any other infrastructure project.”

Disclosure: Cramer’s charitable trust owns shares of Ford.

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Billionaire raffling off SpaceX flight to fund cancer research | Space News

A United States billionaire who made a fortune in tech and fighter jets is buying an entire SpaceX flight and plans to take three people with him to circle the globe this year.

Besides fulfilling his dream of flying in space, Jared Isaacman announced Monday that he aimed to use the private trip to raise $200m for St Jude Children’s Research Hospital, half coming from his own pockets.

A healthcare worker for St Jude already has been selected for the mission. Anyone donating to St Jude in February will be entered into a random drawing for seat number three. The fourth seat will go to a business owner who uses Shift4 Payments, Isaacman’s credit card processing company in Allentown, Pennsylvania.

“I truly want us to live in a world 50 or 100 years from now where people are jumping in their rockets like the Jetsons and there are families bouncing around on the moon with their kid in a spacesuit,” Isaacman, who turns 38 next week, told The Associated Press.

“I also think if we are going to live in that world, we better conquer childhood cancer along the way.”

He’s bought a Super Bowl advertisement to publicise the mission, dubbed Inspiration4 and targeted for October. Details of the ride in a SpaceX Dragon capsule are still being worked out, including the number of days the four will be in orbit after blasting off from Florida. The other passengers will be announced next month.

Isaacman’s trip is the latest private space travel announcement. Three businessmen are paying $55m apiece to fly to the International Space Station next January on board a SpaceX Dragon. And a Japanese businessman has a deal with SpaceX to fly to the moon in a few years.

Isaacman would not divulge how much he is paying SpaceX, except to say that the anticipated donation to St Jude “vastly exceeds the cost of the mission”.

While a former NASA astronaut will accompany the three businessmen, Isaacman will serve as his own spacecraft commander. The appeal, he said, is learning all about SpaceX’s Dragon and Falcon 9 rocket. While the capsules are designed to fly autonomously, a pilot can override the system in an emergency.

A “space geek” since kindergarten, Isaacman dropped out of high school when he was 16, got a GED certificate and started a business in his parents’ basement that became the genesis for Shift4. He set a speed record flying around the world in 2009 while raising money for the Make-A-Wish programme, and later established Draken International, the world’s largest private fleet of fighter jets.

Isaacman’s $100m commitment to St Jude in Memphis, Tennessee is the largest ever by a single individual and one of the largest overall.

“We’re pinching ourselves every single day,” said Rick Shadyac, president of St Jude’s fundraising organisation.

Besides SpaceX training, Isaacman intends to take his crew on a mountain expedition to mimic his most uncomfortable experience so far — tenting on the side of a mountain in bitter winter conditions.

“We’re all going to get to know each other … really well before launch,” he said.

He is acutely aware of the need for things to go well.

“If something does go wrong, it will set back every other person’s ambition to go and become a commercial astronaut,” he said from his home in Easton, Pennsylvania.

Isaacman said he signed with Elon Musk’s company because it is the clear leader in commercial spaceflight, with two astronaut flights already completed. Boeing has yet to fly astronauts to the space station for NASA. While Richard Branson’s Virgin Galactic and Jeff Bezos’ Blue Origin expect to start flying customers later this year, their craft will just briefly skim the surface of space.

Isaacman had put out spaceflight feelers for years. He travelled to Kazakhstan in 2008 to see a Russian Soyuz blast off with a tourist on board, then a few years later attended one of NASA’s last space shuttle launches. SpaceX invited him to the company’s second astronaut launch for NASA in November.

While Isaacman and wife, Monica, managed to keep his space trip hush-hush for the months, their daughters could not. The girls, ages seven and four, overheard their parents discussing the flight last year and told their teachers, who called to ask if it was true dad was an astronaut.

“My wife said, ‘No, of course not, you know how these kids make things up.’ But I mean the reality is my kids weren’t that far off with that one,” Isaacman said.



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Mark Zuckerberg and the Chan Zuckerberg Initiative are launching the Justice Accelerator Fund

The Chan Zuckerberg Initiative, the philanthropy of Mark Zuckerberg and his wife Priscilla Chan, is planning to overhaul its political program and spin out much of its advocacy work to outside organizations, Recode has learned.

It’s a strategic shift for CZI and the largest structural change to the organization since the couple created it five years ago.

Zuckerberg and Chan will launch a new group focused on criminal justice reform that they will back with $350 million from their fortune. CZI will also be effectively merging their in-house immigration work with an outside group also backed by Zuckerberg, Fwd.us, which pushes for comprehensive reform.

All told, the billionaire couple is committing another $450 million to the two causes over the next few years. The changes are the latest evolution in how Zuckerberg is trying to accomplish his policy ambitions at the dawn of a friendlier Joe Biden administration — and at a time when he is becoming more of a political liability for those very causes.

CZI was launched in 2015 with a special focus on politics — one of its three original central “pillars” was an advocacy unit called Justice and Opportunity Initiatives — and it has grown to become one of the most important philanthropies in America. Now, that political work is being outsourced to external organizations, and the JOI team at CZI is expected to largely fold.

The philanthropy is increasing the total amount it is committing each year to criminal justice reform, and it seems likely that the revamp will increase the total amount of money that CZI puts into politics at least in the short term. CZI spent just under $450 million on these JOI programs over the last five years. So it could mean that CZI spends roughly in total as much as it did before over the long term, but in a more nimble, less centralized way — granting outside groups the autonomy to spend on whatever nonprofit or political causes they, and not CZI, deem best.

CZI would then be more of a political bank account and less involved than it is now in direct campaign and advocacy work, which can be hairy and hazardous work that generally makes enemies.

Some CZI employees have been worried about where they would fit into the new structure, according to two sources familiar with the matter, but CZI told Recode there would be no layoffs. Some employees who work on CZI’s political projects could find new homes at the criminal justice group or at Fwd.us.

Some people affiliated with CZI also have concerns, sources say, about whether each existing grantee will continue to take in the same total amount of funding under the new arrangement. CZI is not expected to offer so-called “sunset grants” — major financial commitments to nonprofits when a philanthropy is winding down its work in an area. But groups like Fwd.us are planning to try and ensure grassroots groups will not experience unexpected funding gaps, one source said, although some are nervous because these CZI grantees will now have to convince a new party to fund their work.

CZI’s political spending has drawn more scrutiny as its co-CEO Zuckerberg became more and more politically divisive because of his role as CEO at Facebook. Some of Zuckerberg’s travails in his day job have boomeranged onto CZI, which is a separate organization but is linked reputationally to the Facebook founder. When CZI launched an ambitious attempt this year to pass a California ballot initiative to modify a law that was widely considered the state’s third rail, opponents latched onto Zuckerberg’s involvement as a line of attack.

The new arrangement will, intentionally or not, give Zuckerberg more distance from his specific bets even if it ends up funding the same amount and types of political projects. CZI has also been dogged recently by unrest within the organization about how it deals with race and in its political work, including an ongoing discrimination claim (that CZI has said is “unsubstantiated”).

The spun-out, independent criminal justice group, called the Justice Accelerator Fund, will be led by Ana Zamora, who heads CZI’s work on the topic and used to lead the ACLU in Northern California. Zuckerberg has said that CZI spends about $40 million a year on criminal justice reform grants, making it among the largest funders of this work in philanthropy.

CZI is currently planning to spend about $350 million to stand up the Justice Accelerator Fund over the next five years, for an average of about $70 million a year. That organization, whose precise structure hasn’t yet been determined, will then award grants to new groups. CZI expects the Justice Accelerator Fund to eventually take in money from other donors in the future.

“This time is ripe for a more just America, and this surge of funding will dramatically speed up the pace of progress,” Zamora said in a new letter to CZI partners.

Another $100 million over the next three years will head from CZI to Fwd.us, which was originally focused solely on immigration work but now does some advocacy on criminal justice matters as well. A small amount of that $100 million is expected to be regranted to other groups. The majority of Fwd.us’s funding for operating has long come from CZI, about $30 million a year in funding, meaning that its budget is only increasingly slightly — albeit now with a longer-term commitment.

CZI’s work on housing affordability issues, the third plank of its JOI program, will stay under CZI’s roof and remain more on regional issues in California. Recode reported last month that the head of JOI, who oversaw all of this policy work, had left the organization.

The $100 billion-plus philanthropy will continue its work on the other two non-political priorities of its work — its support for scientific research and its education efforts, both of which have been heavily involved in coronavirus relief efforts.

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Melvin Capital, hedge fund targeted by Reddit board, closed out of GameStop short position Tuesday

Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, manager of the fund Gabe Plotkin told CNBC’s Andrew Ross Sorkin.

The brick-and-mortar videogame retailer, hedge funds’ most-hated stock, was targeted by an army of retail investors who marshaled against short sellers in online chat rooms. In the Reddit forum “wallstreetbets” with more than two million subscribers, rookie investors encouraged each other to pile into GameStop’s equity and call options, creating massive short squeezes in the name.

CNBC could not confirm the amount of losses the firm took on the short position. Citadel and Point72 have infused close to $3 billion into Melvin Capital to shore up the fund’s finances. Plotkin told Sorkin that the speculation that the firm would file for bankruptcy is false.

GameStop shares have more than doubled this week alone to nearly $150 apiece, driving its January gains to 685%. The stock was worth just $6 four months ago.

GameStop shares gained about 60% in premarket trading Wednesday, after popping more than 100% earlier in the session.

Amid GameStop’s explosive rally, short sellers have accumulated losses of more than $5 billion year to date in the stock, including a loss of $917 million on Monday and $1.6 billion on Friday, according to data from S3 Partners.

Short seller Andrew Left of Citron Research said Wednesday that he has covered the majority of his short position in GameStop at a loss. He previously said GameStop will fall back to $20 a share “fast” and called out attacks from the “angry mob” that owns the stock.

Investor Michael Burry said in a now-deleted tweet Tuesday that trading in GameStop is “unnatural, insane, and dangerous” and there should be “legal and regulatory repercussions.” Burry shot to fame by betting against the housing bubble and was featured in Michael Lewis’ book “The Big Short.”

The U.S. Securities and Exchange Commission declined to comment.

Social Capital’s Chamath Palihapitiya jumped into the controversial name, saying in a Tuesday tweet that he bought GameStop call options betting the stock will go higher. His tweet seemed to intensify the rally in the previous session. The stock ended the day 92% higher at $147.98.

Elon Musk after the bell Tuesday commented on the mania on Twitter and linked to the “wallstreetbets” Reddit chat room. The Tesla CEO tweeted to his 42 million followers “Gamestonk!!” The comment appeared to help send GameStop shares soaring in extended trading Tuesday.

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