Tag Archives: Markets

Business

PepsiCo, Generac, Tempur Sealy, others

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Check out the companies making headlines before the bell:

PepsiCo (PEP) – The beverage and snack giant beat estimates by a penny with adjusted quarterly earnings of $1.47 per share, and revenue was above estimates as well. The company said it expects to see organic revenue and adjusted profit growth this year, and also announced a 5% dividend increase.

Generac (GNRC) – Generac shares rose 3% in pre-market trading after the maker of backup generators beat estimates on the top and bottom lines for its latest quarter, and said it expected net sales growth of 25 to 30 percent this year.

Restaurant Brands (QSR) – The parent of Popeyes, Burger King and Tim Hortons missed estimates by 12 cents with adjusted quarterly earnings of 53 cents per share, while revenue was slightly above forecasts. Shares fell about 2% pre-market as comparable restaurant sales fell more than expected.

Tempur Sealy (TPX) – Shares of the mattress maker surged 12% pre-market after it beat forecasts by 15 cents with adjusted quarterly earnings of 67 cents per share. Revenue beat estimates as well, and Tempur Sealy said it expected 2021 sales growth of 15% to 20%.

LabCorp (LH) – The medical-laboratory operator reported adjusted quarterly earnings of $10.56 per share, well above the $8.11 consensus estimate, and revenue was above forecasts as well. Its results were boosted by Covid-19 testing, and shares were up 3.6% pre-market.

Molson Coors (TAP) – The beer brewer’s shares were down 4.5 % pre-market as it reported adjusted quarterly earnings of 40 cents per share, well below the 77-cent consensus estimate. Its results were hurt by ongoing Covid-19 restrictions for restaurants and bars.

Kraft Heinz (KHC) – Kraft Heinz shares rose 1.7% pre-market, as it beat estimates on the top and bottom lines for its latest quarter, and also announced the sale of its Planters snacks business to Hormel (HRL) for $3.35 billion in cash.

Uber Technologies (UBER) – Uber reported a quarterly loss of 54 cents per share, 2 cents less than anticipated, with revenue slightly below estimates. Uber’s results were helped by an expansion in its food delivery business as well as cost reductions. Uber shares were down 3.8% pre-market.

Bumble (BMBL) – Bumble makes its Wall Street debut today after pricing its initial public offering at $43 per share, above the already raised expected range of $37 to $39 per share. The dating service raised $2.2 billion in the IPO, giving it an overall value of more than $7 billion.

Sonos (SONO) – Sonos shares jumped 17% in pre-market trading, after the maker of high-end smart speakers beat estimates on both the top and bottom lines in its latest quarter. Sonos was helped by stronger margins as no promotions were held during the quarter. It also raised its full-year revenue guidance.

iRobot (IRBT) – iRobot earned an adjusted 84 cents per share for the fourth quarter, well above the consensus estimate of 84 cents, with revenue also comfortably topping Wall Street predictions. The maker of the Roomba robotic vacuum cleaner also gave strong full-year revenue and profit guidance. Shares rose 7.3% in pre-market trading.

Zillow Group (ZG) – Zillow beat estimates by 14 cents with adjusted quarterly earnings of 41 cents per share, with the operator of real estate websites also scoring a revenue beat. It also gave upbeat revenue guidance, and announced the acquisition of online home-viewing-scheduling platform ShowingTime.com for $500 million in cash. Zillow shares rose 12% in pre-market trading.

Zynga (ZNGA) – Zynga CEO Frank Gibeau told Barron’s that the mobile game developer is open to an acquisition offer, although it is not actively looking to sell the company. Zynga also reported a 61% jump in the key metric of net bookings during its latest quarter, more than analysts had anticipated.

XPO Logistics (XPO) – XPO earned an adjusted $1.19 per share for the fourth quarter, well above the 67-cent consensus estimate. The logistics company also saw revenue above forecasts and gave strong full-year earnings guidance. XPO is benefiting from a pandemic-induced acceleration in shipping activity due to an explosion in online shopping.

Merck (MRK) – Merck is in talks with both governments and other drugmakers to help produce already approved Covid-19 vaccines. The drugmaker did not specify which governments or other companies were involved in those talks.

Pinterest (PINS) – Pinterest was approached by Microsoft (MSFT) about a possible takeover in recent months, according to people brief on the matter who spoke to the Financial Times. However, the report added that negotiations about a buyout of the image-sharing company were not currently active.

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Business

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

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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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Business

Tesla’s China sales more than doubled in 2020

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Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China January 7, 2020.

Aly Song | Reuters

BEIJING — Tesla’s sales in China more than doubled last year amid the coronavirus pandemic, according to a filing out Monday.

The electric car maker’s sales in China of $6.66 billion last year accounted for about a fifth, or 21% of the $31.54 billion total.

In 2019, Tesla’s China sales reached $2.98 billion, just 12% of the $24.58 billion total.

The U.S. remained Tesla’s largest market, with sales rising 20% last year to $15.21 billion and accounting for roughly half of total sales.

Tesla began ramping up production last year at its factory in Shanghai and selling China-made cars to the local market.

The company’s Model 3 was the best-selling electric car in the country in 2020, according to China’s Passenger Car Association. The automaker also began deliveries of a new model, a China-made Model Y, to local customers this year.

However, Tesla faces competition in the local market from Chinese electric car start-ups like Nio and Xpeng, while regulatory scrutiny has increased.

On Monday, China’s State Administration for Market Regulation said on its website that it and four other government departments recently met with Tesla’s local subsidiaries over an increase in consumer reports of vehicle problems.

Among several incidents that garnered attention on Chinese social media in the last few weeks, a Model 3 reportedly exploded in a Shanghai parking garage in January. Last week, Chinese authorities said Tesla needed to recall more than 36,000 cars due to a touchscreen failure.

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Business

Robinhood sued by family of Alex Kearns, 20-year-old trader who killed himself

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Robinhood was sued Monday for wrongful death by the family of Alex Kearns, a 20-year-old customer who took his life last summer after believing he had racked up big losses on the millennial-favored stock trading app.

“This case centers on Robinhood’s aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalizing profits,” said the complaint filed by his parents Dan and Dorothy Kearns, and his sister Sydney Kearns in a California state court in Santa Clara. The family is based in Naperville, Illinois.

Robinhood’s “reckless conduct directly and proximately caused the death of one of its victims,” the complaint said. The lawsuit is also accusing the brokerage of negligent infliction of emotional distress and unfair business practices.

Alex Kearns, a then-sophomore at the University of Nebraska at Lincoln, committed suicide in June after thinking he had a negative $730,165 cash balance on Robinhood.

The complaint alleges that Kearns misunderstood the Robinhood financial statement and was protecting his family from the financial obligation.

The suit says that Kearns made three attempts to contact Robinhood customer service regarding the massive underwater balance.

However, his messages were met with automated replies, according to the complaint.

In a note to his family that CNBC has seen, Kearns accused Robinhood of allowing him to pile on too much risk. He claimed the puts he bought and the shares sold “should have cancelled out,” according to the note.

Puts are options that give the owner the right to sell a security at a specified price.

The trader said he had “no clue” what he was doing, according to the note.

“How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?” read the note Kearns wrote to his family. “There was no intention to be assigned this much and take this much risk, and I only thought that I was risking the money that I actually owned.”

A Robinhood spokesperson told CNBC, “We were devastated by Alex Kearns’ death. Since June, we’ve made improvements to our options offering.”

Robinhood has become a popular entry point to the stock market for first-time investors. It has grown from 1 million users in 2016 to more than 13 million last spring. Amid the Reddit investor-fueled GameStop drama, traffic analysis site SimilarWeb estimates 3 million more users downloaded Robinhood in January alone.

Robinhood, which is run by CEO Vlad Tenev, has come under scrutiny for its “gamification” of investing and alleged predatory marketing practices.

Robinhood is also facing class-action lawsuits from clients after the app’s decision to restrict trading in certain securities during the recent GameStop controversy. The brokerage firm, which has plans to go public in 2021, has repeatedly said that the majority of its users are long-term investors.

Robinhood, one of the biggest beneficiaries of the retail trading boom in 2020, has also come under scrutiny for the access it gives its clients without proper investing education. Last year, Massachusetts regulators filed a complaint against Robinhood, accusing the trading app of predatory marketing on inexperienced investors.

The Securities and Exchange Commission charged the brokerage in December with misleading customers about how the stock-trading app makes money and failing to deliver the promised best execution of trades.

The Kearns’ family complaint says, “Not only did Robinhood permit Alex to open the account, but when Alex was a freshman in college later that year, it permitted him to trade options.”

“Worse, Robinhood provided almost no investment guidance, and its customer ‘service’ was virtually non-existent, consisting of automated e-mail replies devoid of any human contact or interaction,” the family alleged in the suit.

Here’s Robinhood’s full statement regarding the lawsuit.

“We were devastated by Alex Kearns’ death. Since June, we’ve made improvements to our options offering. These include adding the ability to exercise contracts in the app, guidance to help customers through early assignment, updates to how we display buying power, more educational materials on options, and new financial criteria and revised experience requirements for new customers seeking to trade Level 3 options. In early December, we also added live voice support for customers with an open options position or recent expiration, and plan to expand to other use cases. We also changed our protocol to escalate customers who email us for help with exercise and early assignment. We remain committed to making Robinhood a place to learn and invest responsibly.”

— with reporting from CNBC’s Dan Mangan and Kate Rooney.

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Business

Take-Two, Electronic Arts, Chegg and more

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A drumline performs at the Electronic Arts EA Play event at E3 in Los Angeles, California.

Getty Images

Here’s a look at some of the companies making headlines after the bell.

Take-Two Interactive — The video game stock slipped 3% in extended trading even after the company reported higher-than-expected revenue for its fiscal third quarter. Take-Two posted $814 million in sales for the period, while analysts surveyed by Refinitiv were expecting revenue of $747 million. Take-Two’s earnings-per-share number was not comparable to Wall Street estimates.

Electronic Arts — The video-game giant announced Monday it will acquire mobile-games developer Glu Mobile for $2.1 billion, or $12.50 per share in cash. That price represents a 36% premium to Glu’s closing price on Friday of $9.19 per share. EA shares rose more than 1% on the news. Glu shares were halted in after-hours trading before jumping toward the offer price. “Mobile continues to grow as the biggest gaming platform in the world, and with the addition of Glu’s games and talent, we’re doubling the size of our mobile business,” Electronic Arts CEO Andrew Wilson wrote in a statement. The deal is expected to close in the second quarter of 2021.

Chegg — Chegg shares rose 4.6% on the back of stronger-than-expected fourth-quarter results for the education company. Chegg earned an adjusted 55 cents per share on $205.7 million in revenue. Analysts surveyed by Refinitiv were looking for 49 cents per share and $189.6 million in revenue.

Cleveland-Cliffs — The steel stock shed 3% in extended trading after the company announced it was holding a secondary stock offering of 60 million shares. The offering includes 20 million shares from the company and 40 million shares from shareholder ArcelorMittal.

— CNBC’s Rich Mendez contributed to this story.

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Business

Tweets from Elon Musk and celebrities send dogecoin to a record high

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A visual representation of dogecoin and other cryptocurrencies.

Yuriko Nakao | Getty Images

LONDON — Dogecoin is surging after billionaire Elon Musk and a number of celebrities appeared to back the cryptocurrency on Twitter.

The meme-inspired token rallied 65% in 24 hours to a record high of $0.083745 at 5:30 p.m. ET on Sunday, according to data from CoinMarketCap. As of 5 a.m. ET Monday, dogecoin was up 25% at a price of $0.07415.

Dogecoin’s stellar run has boosted its market value to over $9.5 billion — it briefly hit a high of $10.7 billion Sunday — making it the No. 10 digital coin on CoinMarketCap’s ranking.

At its intraday peak Sunday, trading volume in dogecoin had reached around $13.5 billion in the last 24 hours.

Dogecoin was created in 2013 and is based on the then-popular “doge” meme which portrays a Shiba Inu dog alongside multi-colored text in Comic Sans font. The cryptocurrency was initially started as a joke but has since gained a following.

Retail investors have pumped up dogecoin’s price recently, taking their cue from the tweets of Tesla CEO Elon Musk. Musk has tweeted about dogecoin several times over the years.

More recently, he posted a picture of a fictional “Dogue” magazine — a play on the popular fashion title “Vogue” — leading to an 800% surge in dogecoin’s price.

Musk subsequently threw his support behind bitcoin, saying it is “on the verge of getting broad acceptance” in finance. But he added he doesn’t have a “strong opinion” on other virtual currencies and that his tweets about dogecoin are meant to be taken as jokes.

“But fate loves irony,” Musk said recently on the social audio app Clubhouse. “The most entertaining outcome and the most ironic outcome would be that dogecoin becomes the currency of Earth in the future.”

Musk has seen made several tweets about dogecoin. Just two days after saying he planned to take a break from Twitter “for a while,” Musk returned, posting dogecoin memes and calling the token “the people’s crypto.”

He has been joined by the likes of Snoop Dogg and Kiss singer Gene Simmons in posting tweets backing dogecoin. Snoop Dogg, whose real name is Calvin Cordozar Broadus Jr., tweeted at Musk with a parody of one of his albums. The words on the album cover are replaced with “Snoop Doge” while the doge image covers Broadus’ face.

Meanwhile, Gene Simmons — whose actual name is Gene Klein — has actively promoted dogecoin to his followers, tweeting popular slang phrases in crypto like “HODL” and “to the moon.” Klein says he made a “six figure” investment in dogecoin and also owns other cryptocurrencies, including bitcoin.

The episode is reminiscent of the late-2017 crypto craze, when bitcoin’s price skyrocketed to almost $20,000 before plummeting close to $3,000 the following year. Multiple celebrities had hyped up crypto in 2017, with some endorsing a controversial form of crowdfunding known as an “initial coin offering.”

Dogecoin’s resurgence in the last few weeks has also been down to enthusiasm from a Reddit group called SatoshiStreetBets. Like the WallStreetBets subreddit, which helped fuel the recent GameStop rally, SatoshiStreetBets aims to pump up the prices of cryptocurrencies.

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US

Biden says $15 minimum wage won’t survive Covid relief talks

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President Joe Biden speaks delivers a foreign policy address during a visit to the State Department in Washington, February 4, 2021.

Tom Brenner | Reuters

President Joe Biden said this weekend that it is unlikely a $15 federal minimum wage provision makes it into the next Covid-19 relief package, hitting pause on a key campaign promise as Democrats in Congress press ahead to pass $1.9 trillion in stimulus without Republican support.

Biden said his administration would push for a stand-alone bill to raise the minimum wage.

“I put it in but I don’t think its going to survive,” Biden told CBS’ Norah O’Donnell in an interview scheduled to air in full on Sunday. “My guess is it will not be in [the stimulus bill].”

Democrats in Congress have moved to pass the $1.9 trillion stimulus package without Republican support in the Senate using a parliamentary procedure known as reconciliation. House Speaker Nancy Pelosi, D-Calif., said Friday that the lower chamber aims to pass the fiscal relief package within two weeks.

The budget resolution directs committees to write legislation reflecting Biden’s Covid relief package, while staying under the $1.9 trillion target. Democrats plan to pass provisions like $1,400 direct payments, a $400 per week jobless benefit through September, $350 billion in state, local and tribal government relief, a $20 billion national Covid vaccination program, and $50 billion for virus testing.

The bill is also likely to include $170 billion for K-12 schools and higher educations institutions and $30 billion for rent and utility assistance.

Republicans oppose including a wage hike in the Covid-19 relief package warning it could put added strain on businesses already grappling with the economic fallout of the pandemic. And West Virginia Democrat Sen. Joe Manchin also opposes the pay increase, meaning Democrats wouldn’t have the votes to pass it even with a simple majority under reconciliation.

While Biden said the $15 per hour wage provision would be unlikely to make it in the Covid relief bill, he promised to prioritize passing the wage hike in separate legislation.

“I’m prepared as the president of the United States on a separate negotiation on minimum wage to work my way up from what it is now,” Biden said. “No one should work 40 hours a week and live before the poverty wage and you’re making less than $15 an hour, you’re living below the poverty wage.”

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Business

Elon Musk sent Dogecoin soaring last week. Here are 6 times the Tesla boss has moved markets, from GameStop to Sandstorm.

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From GameStop to obscure gold miners, Tesla boss Elon Musk can move markets

Pool/Getty Images

Move over Warren Buffet, a new market sage has the ear of investors. At least, investors interested in buying joke cryptocurrencies.

That’s right: Elon Musk. A tweet to his 45 million Twitter followers sent “meme” cryptocurrency Dogecoin soaring on Thursday.

The Tesla boss and SpaceX founder was a vocal supporter of the Reddit crowd during the GameStop saga, and one word of his can send investors piling into a company’s stock.

Where does Musk’s market-moving power come from? He is a deeply attractive figure to many amateur investors, who see him as a genius maverick whose electric-car company Tesla has defied Wall Street naysayers.

On top of that, people can trade the savings they’ve built up during lockdown on commission-free apps such as Robinhood. So why not follow where Musk leads?

Neil Wilson, chief market analyst at UK trading platform Markets.com, told Insider he thinks it’s “worrying in some ways that people’s financial interests are at the whim of his tweets – but it’s up to them if they want to be in those assets.”

Good or bad, investors are increasingly aware of Musk’s tweets. Here are 6 times he’s moved markets.

1. Elon Musk sent Dogecoin soaring 60% in minutes with a tweet

On Thursday, cryptocurrency Dogecoin soared as much as 59% in moments.

Why? Because Elon Musk returned to Twitter after a two-day absence to post a picture based on the movie Lion King which showed him holding up Doge, the meme Shiba Inu dog upon which Dogecoin is based.

The digital currency touched as high as $0.0579 on Thursday, although this was some way from the all-time high of $0.0792 reached in January. As of Friday morning, Dogecoin was down around 11% to $0.0457.

Read More: Investors are flocking to trade Dogecoin and other hot digital tokens on Voyager. Its CEO says Bitcoin will hit $100,000 this year

2. Musk helped power the GameStop frenzy

One of Musk’s most high-profile interventions in the markets came at the end of January, when he waded into the day-trading frenzy that sent GameStop shares soaring and battered hedge funds.

On January 26 after markets closed, and as interest in GameStop shares picked up among day traders on social network website Reddit, Musk simply tweeted “Gamestonk!!” with a link to the Reddit forum Wall Street Bets.

The next day, GameStop’s shares rocketed as much as 157% and closed 135% higher, with Wall Street Bets members widely discussing Musk’s tweet. GameStop tumbled a week later, however, to $70.15 on Friday.

The Wall Street Journal reported that one hedge fund who had bet on GameStop decided to get out after Musk’s tweet. Senvest Management ended up making $700 million.

3. The Tesla chief sent investors piling into the wrong Signal

One of the more bizarre examples of Musk’s market-moving power saw investors pile into a firm called Signal after the SpaceX boss tweeted about it. The only problem was, it was the wrong Signal.

Shares of Signal Advance, a small medical technology company, soared more than 11,000% to as high as $70.85 from $0.60 before Musk’s tweet.

Investors seemed to have confused Signal Advance with the encrypted messaging platform that Musk praised in a two-word message: “Use Signal.”

Read More: A fund manager who’s beaten 97% of his peers over the past 5 years shares 6 of the stocks he’s most bullish on as Biden takes a friendlier stance toward cannabis and electric vehicles

Dogecoin is a cryptocurrency based on the Doge meme, started seemingly as a joke

Yuriko Nakao/Getty Images

4. He caused Bitcoin to spike with a hashtag

Bitcoin is a big market, with a capitalization of more than $600 billion. But Musk sent the price of each coin soaring more than 15% at the end of January by simply adding the word “#bitcoin” to his Twitter profile.

The Bitcoin price spiked to as high as $38,406 on January 29, having spent most of the week in a range between $31,000 and $33,000.

Edward Moya, senior market analyst at currency platform Oanda, said in an note: “Bitcoin got lost in the GameStop mania and Musk’s tweet brought cryptos back into the limelight.”

Bitcoin was up around 3% on Friday morning to $38,103.

5. Arts-and-craft retailer Etsy got caught up in the Musk effect

Etsy’s shares jumped as much as 8% on January 26, although they closed lower.

What was behind the spike? Why, Elon Musk saying he had bought a “hand knit wool Marvin the Martian” helmet for his dog, of course.

His satisfaction with his purchase caused the Tesla chief to tweet “I kinda love Etsy” and for the company’s share price to promptly rally in early trading.

Read More: A top-ranked manager at a firm that handles $50 billion in wealth told us 4 ways investors can smartly play day-trading favorites like GameStop without risking it all

6. Musk’s techno tweet boosts obscure gold miner

It’s perhaps the strangest of Musk’s market-moving moments. In his return to Twitter last week, he said “Sandstorm is a masterpiece”, likely referring to the hit 2000 song by Darude.

Day traders went searching for meaning in the stock market, sending shares in Sandstorm Gold – a $1.3 billion Canadian gold miner –  soaring as much as 55% in pre-market trading.

The rally was short-lived, however, with the stock down 1% just before normal trading opened.



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Business

What the GameStop craziness could mean for the stock market’s future

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Tiffany Hagler-Geard | Bloomberg | Getty Images

The stock market is known for being unpredictable and volatile, and any sense of normalcy was blown up during the recent GameStop rally.

Most of us know the story by now: After discovering that several hedge funds had bet on the video game retailer losing value, people banded together on the Reddit forum WallStreetBets to drive up its share price by 1,500%. Over the course of January, GameStop’s stock price ballooned to a high of $483 from a low of $17.

The bubble already appears to be popping, with GameStop shares down to around $55 as of Friday.

Still, the event is unlikely to be soon forgotten, experts say.

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The Reddit forum of retail investors vowing to take on Wall Street still has more than 8.5 million subscribers (or as they call themselves, “degenerates”). And Netflix is already in talks to make a film dramatizing the battle royale between giant hedge funds and a pack of individual day traders.

What’s more, experts say the event tells us about what’s bringing people into the market these days — and what that could mean for investing in the future.

More bubbles

In many ways, the GameStop rally resembles bubbles of the past, but it has some unique characteristics, too, experts say.

“What is new is the scale and speed of the event,” said Veljko Fotak, associate professor of finance at the University at Buffalo.

The ubiquity of smartphones on which people can download investing apps, the availability of cheap or free trading and “a pandemic with a lot of restless energy,” are all factors that contributed to the video game retailer’s rally, said Dan Egan, vice president of finance and investing at Betterment.

Populism spreading across the globe is yet another factor that fueled the bubble, Fotak said. “Some investors were motivated not just by pure greed, but also by a desire to ‘stick it to the man,'” he said.

Many people are also brought into the market these days when they see friends or people they follow on social media touting certain stocks, said David Sekera, chief U.S. market strategist at Morningstar. Some of these posts are very convincing: Users on Reddit, for example, were exchanging high-level analysis on GameStop’s finances.

“The days that equity research was limited to the large, bulge bracket Wall Street firms is long past,” Sekera said.

All of these events that propelled the GameStop bubble could spur many more.

“I do think that, to some degree, this herd Reddit movement is going to continue,” said Jason Reed, a finance professor at the University of Notre Dame. “We’ve already begun to see the movement into other equities and assets, like AMC, Blackberry and silver gaining considerable momentum.”

As shares of GameStop tumbled on Feb. 2, many Reddit users claimed to be holding onto their stock or even buying more, writing that it wasn’t a loss until they sold out.

Source: Reddit

More people investing is positive, but only if they’re doing so wisely, experts say.

Those who buy stocks based off posts on social media, for example, are often taking risks with money they can’t afford to lose, Egan said.

“One of the biggest concerns is newer investors seeing a ‘hot’ stock, but not fully understanding the ramifications of investing in it,” he said. “A lot of retail investors could lose their shirt.”

Fotak said he read of one recent law school graduate who said he was elated by his wins on GameStop.

“He could now afford to pay off his student loans,” Fotak said. “Yes, there is a lot of greed at play here.

“But there is also a lot of desperation,” he added. “I really, truly, hope he sold right away.”

Less shorting?

Hedge funds that had shorted GameStop suffered huge losses as the pack of day traders on Reddit bought the stock en masse, shooting up its price. Melvin Capital, for example, lost more than 50% in January.

Those setbacks could make other investors more skittish about shorting, or betting against stocks, experts say.

“After seeing several other funds get carried off the field on stretchers from these short positions, hedge fund managers will be much more cautious as to which stocks they will be willing to short,” Sekera said.

Less shorting means a less healthy market, Fotak said.

Bubbles tend to be less common in countries where short sellers are less restricted, he said. That’s because short sellers’ pessimism can balance out some of the optimism about a certain sector or stock.

“And in this climate, with market valuations at record levels, we need the contrarian views of short sellers more than ever,” Fotak added.

Another advantage of short sellers is that they often expose serious problems at companies that other investors and regulators have missed, Fotak said.

“Since they are looking for firms that are overvalued, they are always on the lookout for fraud,” he said, adding they often publish research on companies’ bad practices.

And so it’s unfortunate that the GameStop debacle may curb shorting, Fotak said.

“To the extent that delays the release of negative information, we all suffer from a less efficient market,” he said.

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Business

China video apps Kuaishou, Douyin become e-commerce sites like Alibaba

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A man holding a phone walks past a sign of Chinese company ByteDance’s app TikTok, known locally as Douyin, at the International Artificial Products Expo in Hangzhou, Zhejiang province, China October 18, 2019.

Reuters

BEIJING — Chinese consumers are shopping more through livestreaming and video apps — a new trend that’s grabbing a slice of the massive market traditionally dominated by e-commerce giant Alibaba.

Popular livestreaming and short video apps became significant marketing channels in 2020, generating billions in merchant sales by connecting viewers to existing e-commerce sites, or their own.

Just take the example of short video and livestreaming app Kuaishou, which on Friday raised more than $5 billion in Hong Kong’s biggest IPO since the coronavirus pandemic, according to Wind Information.

Gross merchandise volume (GMV) for the 11 months through November grew nearly eight times from a year ago to 332.68 billion yuan ($51.44 billion), Kuaishou said in its prospectus. GMV is a metric commonly used in e-commerce to measure the total value of goods sold over a certain period of time.

The company primarily makes money by selling virtual gifts that users can buy for their favorite live streamers. Kuaishou shares surged nearly 200% at the open Friday.

Along with various types of e-commerce players springing up in recent 2-3 years, … customers’ appetites on online shopping platforms are also diversifying.

Douyin, the Chinese version of the TikTok video app that’s owned by ByteDance, saw e-commerce transactions triple last year to 500 billion yuan in GMV, according to a report Wednesday from Chinese tech news site LatePost.

However, most of the GMV went to third-party e-commerce sites like JD.com and Alibaba’s Taobao, the report said. Only about 100 billion yuan in Douyin’s GMV came from the app’s own e-commerce platforms, the report said.

ByteDance said in a statement to CNBC that LatePost’s figures on GMV are not accurate and that third-party sales resulting from re-directed user traffic should not be counted as part of the GMV.

Tencent’s Wechat messaging app, which counts more than 1 billion daily active users, has also become a platform for online shopping.

In January, WeChat said GMV for businesses running their own mini-programs in the app rose 255% last year to an undisclosed amount, while GMV for physical goods sold through those programs rose 154%.

“Along with various types of e-commerce players springing up in recent 2-3 years, including live streaming, social commerce, etc, customers’ appetites on online shopping platforms are also diversifying,” Morgan Stanley analysts said in a report last month. They predict Chinese consumer spending overall will double in the next decade to $12.7 trillion.

Growing market for all e-commerce players

The reports on video apps’ GMV show how quickly the streaming platforms are growing as a portal to online shopping, even if established players still dominate.

For example, Alibaba’s video streaming sales site Taobao Live generated over 400 billion yuan in GMV for 2020, according to the latest earnings report. But the company’s GMV for the Nov. 1 to 11 shopping holiday alone was 498 billion yuan.

“There is a lot of demand in China for e-commerce, so Alibaba, JD.com, they have the market because they are both online and offline,” said Suresh Dalai, senior director at consulting firm Alvarez & Marsal, which focuses on retail operations in Asia.

“They provide a one-stop shop through their ecosystem,” Dalai said. “These retailers, they’re not suffering even with these new e-commerce players coming out.”

Online retail sales of physical goods in China rose 14.8% last year to a total of 9.759 trillion yuan, accounting for a quarter of all consumer goods sold in the country, the National Bureau of Statistics said.

While the number of online shoppers climbed to 782 million by December, the country had more internet users watching videos, at 927 million, government agency China Internet Network Information Center (CNNIC) said in a report this week.

In particular, livestreaming e-commerce users surged by 123 million between March and December, for a total of 388 million, the report said. About two-thirds of these users have made a purchase while watching a livestream, the report said.

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