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Business

Short Sellers Boost Bets Against SPACs

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Short sellers are coming for SPACs.

Investors who bet against stocks are targeting special-purpose acquisition companies, one of the hottest growth areas on Wall Street. The dollar value of bearish bets against shares of SPACs has more than tripled to about $2.7 billion from $724 million at the start of the year, according to data from S3 Partners.

Some of the stocks under attack belong to large SPACs that surged in recent months, in part because they were backed by high-profile financiers. A blank-check company created by venture capitalist

Chamath Palihapitiya

that plans to merge with lending startup Social Finance Inc. is a popular target, with 19% of its shares outstanding sold short, according to data from S&P Global Market Intelligence. The short interest in

Churchill Capital Corp. IV,

a SPAC created by former investment banker

Michael Klein

that is merging with electric-vehicle startup Lucid, more than doubled in March to about 5%.

Others are wagering against companies after they combine with SPACs. Muddy Waters Capital LLC announced last week it was betting against

XL Fleet Corp.

, a fleet electrification company that went public in December after merging with a SPAC. XL has since said Muddy Waters’s report, which alleged XL inflated its sales pipeline and made misleading claims about its technology among other issues, had “numerous inaccuracies.” 

XL’s stock price dropped the day Muddy Waters released its report by about 13%, to $13.86, from its prior close on March 2. Shares closed Friday at $12.79.

Shares of

Lordstown Motors Corp.

fell nearly 17% Friday after Hindenburg Research released a report saying the electric-truck startup had misled investors on its orders and production. The company, which merged with a SPAC in October, said the report contained half-truths and lies. The short interest in Lordstown shares rose to 5% from 3.4% in the week before the report’s publication, according to data from S&P.

“SPACs are an area of focus,” said Muddy Waters’s

Carson Block.

The veteran short seller said SPACs largely make up the universe of companies he views as both “abysmal” and relatively free from technical challenges, such as high short interest, which can make betting against them difficult.

SPACs are shell firms that raise capital by issuing stock with the sole purpose of buying or merging with a private company to take it public. They are dominating the market for new stock issues, becoming a status symbol for celebrities while pumping the value of acquisitions, like betting company

DraftKings Inc.,

into the tens of billions of dollars.

Hedge funds that buy into SPACs early see them as a way to make lofty returns without much risk. Individual investors are attracted by the chance to get positions in newly public companies that they could rarely purchase through traditional IPOs. The Securities and Exchange Commission issued a statement on Wednesday warning that it “is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it.”

A monthslong rally in the stocks lost steam recently amid a broad selloff in technology and high-growth companies. An index of SPAC stocks operated by Indxx fell about 17% from mid-February to March 10, while the Nasdaq Composite Index declined about 7.3% over the same period.

“These are all momentum stocks, and a lot of people want to short them,” said

Matthew Tuttle,

whose firm Tuttle Tactical Management runs an exchange-traded fund that allows investors to hold a portfolio of SPAC stocks. Mr. Tuttle is preparing to launch an ETF that bets against “de-SPAC” stocks of companies that have merged with a SPAC—like electric-truck manufacturer

Nikola Corp.

and baked-goods maker

Hostess Brands Inc.

—and a separate fund that invests in the stocks.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

Postmerger companies are particularly attractive to short because they have larger market capitalizations, making their shares easier to borrow, and because early investors in the SPACs are eager to sell shares to lock in profits, analysts and fund managers said.

Short sellers borrow stocks they believe are overvalued and immediately sell them, hoping to repurchase the shares for a lower price when they need to be returned and to pocket the difference. The strategy proved dangerous in recent months when individual investors organized on social media to push up stocks like GameStop Corp., forcing short sellers to buy shares and cap their losses, helping to drive prices still higher.

Continued strong investor demand for SPACs could catch short sellers in a similar squeeze. Shorting SPACs can also be risky because their shares have a natural floor at $10, the price at which they can be redeemed before a merger, and because they are prone to sharp price moves, analysts said.

Still, the portion of shares sold short in SPACs and their acquisitions is climbing.

A blank-check company created by venture capitalist Chamath Palihapitiya that plans to merge with lending startup Social Finance Inc. is a popular target.



Photo:

Brendan McDermid/Reuters

Some are betting against stocks they believe rose too fast, to unsustainable valuations. The price of bioplastics company

Danimer Scientific Inc.

nearly tripled to $64 in the first six weeks of the year after it was bought by a SPAC. The short interest in Danimer stock has climbed to 8.5% from around 1% in January, and its share price has traded down to about $42, according to data from S&P.

Others are making bearish bets to hedge against potential losses in SPAC stocks they own.

Veteran short seller

Eduardo Marques

cited SPACs and their boosting the number of U.S.-listed stocks as a short-selling opportunity, according to a pitch for a stock-picking hedge fund called Pertento he plans to launch this year. America’s roster of public companies had shrunk from the mid-1990s onward, but that trend has recently reversed, partly because of SPACs.

Their popularity has helped spark new Wall Street offerings.

Goldman Sachs Group Inc.

this year started offering clients set baskets of similar stocks to short, pitching them as a way to hedge SPAC exposure, people who have seen the offering said. Clients typically customize the baskets Goldman offers, which are thematic and sector-focused, such as on bitcoin and electric vehicles.

Kerrisdale Capital founder

Sahm Adrangi

started shorting postmerger SPAC companies earlier than most, with a public bet in November against the stock of frozen-food maker

Tattooed Chef Inc.,

which still trades above its price at that time. But the stock has fallen about 13% during the recent market slump.

“We saw these stocks go up a lot and now that people are de-risking, these highflying SPACs are coming down to earth,” Mr. Adrangi said.

—Amrith Ramkumar and Mike DeStefano contributed to this article.

SHARE YOUR THOUGHTS

How long do you think the SPAC boom will continue, and why? Join the conversation below.

Write to Matt Wirz at matthieu.wirz@wsj.com and Juliet Chung at juliet.chung@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Health

Vaccine vacancies – multiple providers short on people to give COVID-19 shot

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More than 1.2 million doses of coronavirus vaccines have been given to people in Louisiana, according to the Louisiana Department of Health. It estimates 11.27% of the population in Region 1, which includes Orleans, Jefferson, St. Bernard and Plaquemines Parishes, has received at least one dose.In the months since coronavirus vaccines first became available, Dr. Jennifer Avegno, Director of the New Orleans Department of Public Health, says the supply of shots and people’s willingness to get vaccinated have both increased. Eight thousand people who are not in the state’s current vaccine priority group are on the city’s 311 waitlist to receive the vaccine. Avegno says it is time to make more people eligible before variants of the virus take hold.“We are really in a race against the variants,” Avegno said. “Our supply is not going to suddenly skyrocket in the next few weeks, but it is getting a lot better. So, the more people we can vaccinate ahead of these variants taking hold in the U.S. that has got the potential to really stop or at least blunt any fourth surge that might be coming.”LDH reports cases of the U.K. variant have already been confirmed in Metro New Orleans.Fergie Lewis has been calling local pharmacies and hospitals for the past month, trying to find extra doses of the vaccine. She is not in the state’s current priority group to receive the vaccine, but she got the shot Sunday from a Mid City clinic with a vaccine cancellation.“I’m glad that I’m one less person that has to be worried about and then it just feels that there’ a lot more people that are being able to get the waste doses … It doesn’t hurt to ask because you never know when it may work out for you to be able to get one,” Lewis said. Both Lewis and Avegno said the state should allow more people to get vaccinated. In a statement to WDSU News, Shauna Sanford Communications Director for the Office of the governor wrote: “The Governor’s Office and LDH are constantly evaluating the vaccine supply and when to add new groups to the eligibility list. The supply must be able to meet the demand. As more vaccines and supply become available that will help with the expansion, which has already happened. We’re asking those who are not yet eligible to remain patient, their turn is coming. This is an ongoing effort and updates will be announced as soon as possible. LDH estimates approximately 48 percent of the current priority group in Louisiana has received at least one dose of the vaccine.”

NEW ORLEANS —

More than 1.2 million doses of coronavirus vaccines have been given to people in Louisiana, according to the Louisiana Department of Health. It estimates 11.27% of the population in Region 1, which includes Orleans, Jefferson, St. Bernard and Plaquemines Parishes, has received at least one dose.

In the months since coronavirus vaccines first became available, Dr. Jennifer Avegno, Director of the New Orleans Department of Public Health, says the supply of shots and people’s willingness to get vaccinated have both increased. Eight thousand people who are not in the state’s current vaccine priority group are on the city’s 311 waitlist to receive the vaccine. Avegno says it is time to make more people eligible before variants of the virus take hold.

“We are really in a race against the variants,” Avegno said. “Our supply is not going to suddenly skyrocket in the next few weeks, but it is getting a lot better. So, the more people we can vaccinate ahead of these variants taking hold in the U.S. that has got the potential to really stop or at least blunt any fourth surge that might be coming.”

LDH reports cases of the U.K. variant have already been confirmed in Metro New Orleans.

Fergie Lewis has been calling local pharmacies and hospitals for the past month, trying to find extra doses of the vaccine. She is not in the state’s current priority group to receive the vaccine, but she got the shot Sunday from a Mid City clinic with a vaccine cancellation.

“I’m glad that I’m one less person that has to be worried about and then it just feels that there’ a lot more people that are being able to get the waste doses … It doesn’t hurt to ask because you never know when it may work out for you to be able to get one,” Lewis said. Both Lewis and Avegno said the state should allow more people to get vaccinated.

In a statement to WDSU News, Shauna Sanford Communications Director for the Office of the governor wrote: “The Governor’s Office and LDH are constantly evaluating the vaccine supply and when to add new groups to the eligibility list. The supply must be able to meet the demand. As more vaccines and supply become available that will help with the expansion, which has already happened. We’re asking those who are not yet eligible to remain patient, their turn is coming. This is an ongoing effort and updates will be announced as soon as possible. LDH estimates approximately 48 percent of the current priority group in Louisiana has received at least one dose of the vaccine.”

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Sports

College basketball scores, winners and losers: Florida State falls short, opens door for Virginia to win ACC

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The final Saturday of the 2020-21 college basketball regular season absolutely delivered. There were NCAA Tournament bracket implications all across the country, buzzer-beaters, upsets and a top-10 thriller that set the stage for an epic Big Ten tournament. 

Illinois’ win at Ohio State marked both the return of Ayo Dosunmu and the Fighting Illini moving one step closer to securing a No. 1 seed in the NCAA Tournament after they entered the day as the final projected No. 1 seed in Jerry Palm’s Bracketology. It helps not only that Illini rolled off back-to-back road wins against top-10 teams but that the victories came against a Michigan team seemingly locked into the top line and an Ohio State team that was holding onto slimming chances that it could roar back from a losing streak and close the season strong after holding that “projected No. 1 seed” status earlier in the season. 

While Illinois was celebrating the return of its best player, projected No. 4 seed Oklahoma State proved that it had depth beyond Cade Cunningham with a win at West Virginia while the potential No. 1 overall pick in the 2021 NBA Draft nursed an ankle injury suffered on Thursday night. On the other end of the spectrum, projected No. 3 seed Villanova played its first game since losing Collin Gillespie, and not only lost at Providence, but saw guard Justin Moore suffer an ankle injury in the first half. 

North Carolina, a projected No. 11 seed, was one of the big winners of the night with its dominant win against a Duke team on the bubble, strengthening its NCAA Tournament profile and closing out a regular season sweep of its biggest rival. The loss puts Duke’s streak of 24 consecutive NCAA Tournament appearances in real focus, especially since the 11-11 finish marks the first time the Blue Devils haven’t had a winning record in the regular season since that 1995 absence from the Big Dance.  

The day saw multiple No. 1 seeds lose in their conference tournaments and a buzzer-beating winner from USC to sweep UCLA in a battle. We get into some of that and much more below in our edition of winners and losers from another loaded Saturday in college hoops. 

Winner: Oklahoma State without Cade Cunningham 

With star freshman Cade Cunningham sidelined due to an ankle injury and leading rebounder Isaac Likekele also missing a fourth straight game with a hand injury, no one would have blamed the No. 17 Cowboys for mailing it in during Saturday’s regular-season finale at No. 6 West Virginia. Instead, OSU secured one of its most impressive victories of the season with an 85-80 win over the Mountaineers. Avery Anderson III led the Cowboys with 31 points as he bested his previous career-high by 14 points and reminded the country that this team is loaded with talent beyond its one-and-done star. 

Loser: Villanova’s bad luck continues

The No. 10 Wildcats were already dealing with the crushing loss of senior leader Collin Gillespie for the rest of the season. In the first half of their first game without Gillespie on Saturday, third-leading scorer Justin Moore went down, and Villanova coach Jay Wright said Moore will need an MRI on his knee. As if things weren’t tough enough for the Wildcats, they ended up losing 54-52 at Providence in a game that would have gone to overtime if this tip-in had come just an instant sooner. 

Matt Painter is 7-0 against Indiana since Archie Miller was hired, and there isn’t a Purdue fan in the Hoosier state who won’t be reminding their Indiana alum co-workers of this fact on Monday and throughout the offseason. Beyond the rivalry bragging rights, however, is some real excitement about this Purdue team as we kick off March Madness. The Boilermakers are a projected No. 4 seed with a strong NCAA Tournament profile that includes a sweep of Ohio State and a win against Wisconsin, but just as exciting as the team sheet is their current form. Purdue has five straight wins and plenty of signs to suggest this group that relies on two freshmen starters and two more rookies as significant contributors off the bench are growing up and ready to play some of their best ball in the postseason. 

Loser: Duke’s NCAA Tournament hopes

The Blue Devils got demolished 91-73 by rival North Carolina as their NCAA Tournament hopes took a potentially fatal blow. At 11-11, Duke will need a strong run in the ACC Tournament to avoid missing the Big Dance for the first time since 1995. Saturday’s loss means the Blue Devils are the No. 10 seed for the ACC Tournament and will have to play Tuesday against No. 15 seed Boston College. Seeing that will be surreal.

Loser: Florida State gives up ACC crown in South Bend

The Seminoles had a chance to clinch the outright regular season ACC championship for the second straight season on the road at Notre Dame. It wasn’t the only path to a conference championship and a No. 1 seed in the ACC Tournament, but beating the Fighting Irish certainly seemed like the easiest path considering Notre Dame had lost four straight games and things had gotten bad enough for the students to chant “Fire Brey” at the conclusion of Wednesday night’s loss to NC State. Brey and Notre Dame helped turn the tide in a major way with this win against the Seminoles, but the bigger story is a missed opportunity for Florida State, which entered the day as a projected No. 3 seed. The bad loss cost the Seminoles the regular season championship as Virginia went on to beat Louisville later in the day. 

Winner: USC’s Tahj Eaddy beats Bruins at buzzer

Down 63-61 with 3.7 seconds remaining, USC guard Tahj Eaddy shook off the fact that he had missed five of his six three-point attempts in a game the Trojans had never led. This was the rivalry against UCLA in Pauley Pavilion, and Eaddy was going to step up in a way that would prove to be a dagger for all daggers for the Bruins. UCLA did almost everything right to avenge the lopsided loss to the Trojans from earlier in the year and defend home court to split the series, but it wasn’t enough as Eaddy’s 3-pointer at the horn cemented the sweep for Andy Enfield and a USC team that will be dangerous in the NCAA Tournament. UCLA, on the other hand, still needs to beef up its NCAA Tournament resume a bit after entering the day as a projected No. 10 seed but still on the bubble, according to Palm.

Loser: No. 1 seeds missing out on auto-bids 

The top seed in the Patriot League Tournament fell on Saturday afternoon as Navy took a 76-68 defeat at the hands of Loyola-Maryland. That opens the door for Colgate, winners against Boston University for the fifth time this year, to take advantage of the situation as it avoids a potential matchup with the Midshipmen in its pursuit of a conference championship and NCAA Tournament bid. Navy, the league’s best defensive team, and Colgate, the league’s best offensive team, never played in the regular season and now won’t in the conference tournament. The Raiders, now 12-1, become the new favorites to claim the auto-bid from the Patriot League. 

But that wasn’t all: top-seeded UMBC lost to UMass Lowell in the America East tournament and Wagner lost to Mount St. Mary’s in the NEC tournament. Throw in Belmont’s loss to Morehead State in the Ohio Valley Conference Tournament final with a loss by Texas State to Appalachian State in the Sun Belt Tournament quarterfinals you’ve got five 1-seeds who, more than likely, saw their NCAA Tournament hopes dashed on Saturday. It wasn’t an awful day overall for the No. 1 seeds. Loyola Chicago, St. Bonaventure and Georgia State moved one step closer to the NCAA Tournament with wins in their tournament semifinals, while UNCG and South Dakota State avoided early upsets in their quarterfinal matchups. 

Belmont’s loss, given it coming in the championship game and the team’s 26-4 record, brings the most significant fallout. The Bears are a good team that lost quality opponents from its 2020-21 non-conference schedule because of the pandemic, removing several opportunities to record quality NCAA Tournament wins and boost the team’s strength of schedule ratings. But even with context applied to the team’s metrics, the argument will be tough against other bubble teams and it’s possible Saturday’s loss moves the Bears from the Big Dance to the NIT. 

Winner: Rutgers cements NCAA Tournament resume

The Scarlet Knights entered Saturday’s regular-season finale at Minnesota as a projected No. 9 seed in the NCAA Tournament, and may still have been in the field with a loss. But for a program that hasn’t been to the Big Dance since 1991, some reassurance would be nice. Rutgers got that by knocking off Minnesota 77-70 in overtime to enter the Big Ten Tournament with a 14-10 (10-10 Big Ten) record. Last year’s squad was going to break the program’s NCAA Tournament drought, but COVID-19 wiped out the opportunity. So it was nice to see the long-suffering Scarlet Knights get a chance to exhale on Saturday.

Loser: Embattled Big Ten coaches

Wins on Saturday probably wouldn’t have done much to salvage the faded NCAA Tournament hopes of Indiana and Minnesota. But embattled Gophers coach Richard Pitino and scrutinized Hoosiers coach Archie Miller sure could have used the victories. The Rutgers loss was the seventh in a row for the Gophers, who will finish with a losing record for the second straight season and fourth time in Pitino’s eight seasons unless they win a couple games in what figures to be a brutal Big Ten Tournament. As for Miller, the Hoosiers are stumbling into the Big Ten Tournament with five straight losses. This is Miller’s fourth season leading the Hoosiers, and his tenure has seen the program ranked in the AP Top 25 for a grand total of five weeks. That was back in 2019 when they peaked at No. 21 and then missed the NCAA Tournament.

Loser: Big East bubble teams

Palm dubbed Seton Hall’s game at St. John’s as a “must-win” for the Pirates’ to stay in the hunt for an at-large bid. But they must have missed the memo, because St. John’s handed the Pirates their fourth straight loss to end the regular season. The Red Storm won 81-71, even without star freshman Posh Alexander. Seton Hall will get a rematch on Thursday in the quarterfinals of the Big East Tournament.

Xavier also suffered a rough loss Saturday, making it a bad day in general for the Big East considering that standard-bearer Villanova struggled as well. The Musketeers entered as a projected No. 9 seed, according to Palm, but lost 66-59 at Marquette. Xavier will have to play in the first round of the Big East Tournament on Wednesday against Butler and will probably a need a couple of wins to feel better about the chances of hearing its name called on Selection Sunday.

Winner: Alabama roars back against Georgia 

Stop me if you’ve heard this before, but Georgia led Alabama at halftime and then the Crimson Tide came out of the locker room with decidedly different play and stormed back for a win. OK, all Tua-related national championship game jokes aside, this was a strong course correction from an Alabama team that turned on the jets and starting burying three-pointers en route to turning a first-half double-digit deficit into a double-digit win. Villanova transfer Jahvon Quinerly came off the bench and had a team-high 18 points to lead the Crimson Tide, who overcame 22 turnovers to improve to 21-6 on the year while reinforcing their status as a projected No. 2 seed in the Big Dance.  

Loser: it gets worse for ASU and ISU

Mercifully, Arizona State’s season of misery is nearly over. After beginning the regular season ranked No. 18 in the AP poll, the Sun Devils ended it Saturday with a 10-13 (7-10 Pac-12) record by losing 98-59 at Utah. Going long stretches of the year without talented freshmen Josh Christopher and Marcus Bagley hurt this squad, but there’s no reason ASU should be this bad.

Speaking of bad, how about Iowa State? The Cyclones lost their 17th straight game on Saturday when they fell 61-56 against a Kansas State team that is finishing the regular season just 8-19. As bad as the Wildcats have been this season, they should feel good about themselves compared to the Cyclones, who are 2-21. At the moment, ISU is just 14-41 over the past two seasons and there is no indication whatsoever that a run in the Big 12 Tournament is even a remote possibility.

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Business

‘Big Short’ investor Michael Burry has warned of a stock-market bubble and slammed Tesla, Robinhood, bitcoin, and the GameStop frenzy in recent weeks. Here are his 17 best tweets. | Currency News | Financial and Business News

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Christian Bale as Michael Burry in “The Big Short.”

The Big Short/Netflix

Michael Burry has been sounding the alarm on hype and speculation in markets for months, warning that the reckless promoting and buying will result in a devastating crash.

The investor has taken aim at Tesla – which he’s short – as well as bitcoin, Robinhood, and the GameStop buying frenzy in recent weeks.

The Scion Asset Management chief is best known for his billion-dollar bet against the US housing bubble in the mid-2000s, which was immortalized in Michael Lewis’ book “The Big Short.” He was played by Christian Bale in the movie adaptation.

Here are Burry’s 17 best tweets, lightly edited and condensed for clarity:

1. “Markets have now bubbled over in a dangerous way.”

2. “People say I didn’t warn last time. I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.”

3. “Fads today (#BTC, #EV, SAAS, #memestocks) are like housing in 2007 and fiber/.com/comm/routers in 1999. On the whole, not wrong, just driven by speculative fervor to insane heights from which the fall will be dramatic and painful.”

4. “Speculative stock #bubbles ultimately see the gamblers take on too much debt. #MarginDebt popularity accelerates at peaks. At this point the market is dancing on a knife’s edge. Passive investing’s IQ drain, and #stonksgoup hype, add to the danger.”

5. “So, @elonmusk, yes, I’m short $TSLA, but some free advice for a good guy….Seriously, issue 25-50% of your shares at the current ridiculous price. That’s not dilution. You’d be cementing permanence and untold optionality. If there are buyers, sell that #TeslaSouffle.”

6. “Well, my last Big Short got bigger and Bigger and BIGGER too….$TSLA $60 billion increase in market cap today alone…1 GM, 2 Hersheys, 3 Etsys, 4 Dominos, 10 Vornados…enjoy it while it lasts.”

7. “$BTC is a speculative bubble that poses more risk than opportunity despite most of the proponents being correct in their arguments for why it is relevant at this point in history. If you do not know how much leverage is involved in the run-up, you may not know enough to own it.”

8. “I don’t hate $BTC. However, in my view, the long-term future is tenuous for decentralized crypto in a world of legally violent, heartless centralized governments with #lifeblood interests in monopolies on currencies. In the short run anything is possible – why I am not short #BTC.”

Read more: ‘We’re in a very unusual situation’: A 48-year market vet breaks down why stocks are hurtling towards an 80% drop this year – and says gold will soar to $2,500 as soon as Q2

9. “A doge’s breakfast maybe. We are in a blow-off top in all things.” – commenting on the hype around dogecoin.

10. “I went public when it was cheap, and I went public when it was time to get out. Same with anything else. Calling it as I see it, and sharing a bit. In 2005-6 it was not so easy to share.” – on investing in GameStop then exiting it.

11. “Hey, $GME is now a $stonk and may go >$1000, but if I made a life-altering amount in this stock, I’d punch out. Main Street has Wall Street by the cojones. Great story/LOVE it. Tee it: bulls make money, bears make money, #pigsgetslaughtered. #Fundamentals.”

12. “There really can’t be another GME. Nothing else is/was even close to as shorted (100+% of float), so small (microcap) and so hated/ignored/dismissed prior to the #thebigshortsqueeze. It was a uniquely perfect set up. There won’t be another like it. Much like #thebigshort.”

13. “If I put $GME on your radar, and you did well, I’m genuinely happy for you. However, what is going on now – there should be legal and regulatory repercussions. This is unnatural, insane, and dangerous.”

14. “If you do not use #robinhood, you have to see it to understand what #gamification of #stonks/options means. So here it is. If this looks like a serious investing app to you, and NOT a dangerous casino ‘fun for all ages,’ you’ve been #gamified.”

15. “Special Purpose Acquisition Companies, or #SPACs (~ blank check companies), are hotter than ever. Companies going public this way are not well-vetted. Anyone with a reputation has incentive to do a SPAC & consummate a deal, regardless of quality.”

16. “It is too early, she is too hot, and, today, short sellers are timid, but Wall Street will be ruthless in the end.” – on Ark founder and CEO Cathie Wood.

17. “I am not running for president. I am far too flawed. Do you really want to see a cross-eyed President of the United States of America? No one really wants that. I’d have to wear a patch, and I don’t want to wear a patch.”

Read more: The investing chief of a crypto hedge fund breaks down why he thinks bitcoin will achieve a $5 trillion market cap by 2023 – and shares 2 emerging areas of the asset class that he’s bullish on

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Business

Private payrolls growth well short of expectations for February

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Private payroll growth disappointed in February despite otherwise encouraging signs of economic growth, according to a report Wednesday from ADP.

Companies added just 117,000 positions for the month, well below the 225,000 forecast from economists surveyed by Dow Jones.

The total also represented a sharp decline from the upward revised 195,000 jobs in January.

The ADP report “is a disappointment given that the drop-off in coronavirus case numbers and the resulting lifting of containment measures should be giving the economy a bigger shot in the arm,” said Paul Ashworth, chief U.S. economist at Capital Economics.

The weak ADP reading comes despite solid projections for economic growth in the first quarter. According to the Atlanta Federal Reserve’s GDPNow tracker, the U.S. is on track for a 10% gain to start 2021.

“The labor market continues to post a sluggish recovery across the board,” said Nela Richardson, chief economist at ADP. “We’re seeing large-sized companies increasingly feeling the effects of COVID-19, while job growth in the goods producing sector pauses.”

All of the net job growth came from the services side.

Trade, transportation and utilities led sectors last month with the addition of 48,000 positions. Education and health services increased 35,000, while the battered hospitality industry, which took the worst of the pandemic-related hit, added just 26,000 jobs. The sector is down 3.8 million positions from where it stood a year ago, just before the worst of the Covid-19 crisis hit.

Professional and business services contributed 22,000 to the total.

Manufacturing lost 14,000 jobs for the month while construction rolls decreased by 3,000.

“With the pandemic still in the driver’s seat, the service sector remains well below its pre-pandemic levels; however, this sector is one that will likely benefit the most over time with reopenings and increased consumer confidence,” Richardson said.

Companies with between 50 and 499 employees saw the greatest growth, with 57,000 new jobs, while small businesses added 32,000 and large firms contributed 28,000.

Though the figures can differ widely, the ADP survey sometimes can provide clues to the more closely watched nonfarm payrolls report that the Labor Department releases each month.

January produced just 49,000 nonfarm jobs, according to the government, well below the ADP estimate, which is compiled with Moody’s Analytics. The February government report is expected to show a gain of 210,000, according to Dow Jones estimates.

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Business

Rocket Companies stock skyrockets, S3 says rally and short selling is reminiscent of another ‘meme’ stock

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Shares of Rocket Companies Inc.
RKT,
+60.45%
blasted 74.4% higher on very heavy volume in afternoon trading Tuesday, enough to pace all gainers on major U.S. exchanges, and put them on track for a record close. Trading volume was 306.4 million shares, compared with the full-day average of about 13.0 million shares over the past 30 days. The real estate services company, with brands including Rocket Mortgage and Rocket Homes, did not immediately respond to a request for comment. The stock is headed for the biggest one-day gain since it went public on Aug. 6, 2020, while volume nearly triple the previous record 111.6 million shares on Aug. 6. The stock has now skyrocketed 113.6% over the past three days, since the company reported better-than-expected fourth-quarter earnings and announced a special dividend of $1.11 a share. S3 Analytics said there has been a “large amount of short selling” into the stock’s (RKT) recent rally, with short interest interest increasing to 47.9 million shares, or 45.8% of the public float. “RKT’s stock price and short selling activity is reminiscent of another recent highflying ‘meme’ stock — GameStop Inc.
GME,
-1.07%,
” wrote Ihor Dusaniwsky, managing director of predictive analytics at S3 in a note to clients. The stock has now rallied 110.8% over the past three months, while the S&P 500
SPX,
-0.46%
has tacked on 5.9%.

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Business

Shares of Rocket Companies, a large short target of hedge funds, jump more than 20%

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The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the logo on a smartphone arranged in Hastings-On-Hudson, New York, U.S., on Friday, Jan. 29, 2021.

Tiffany Hagler-Geard | Bloomberg | Getty Images

Shares of Rocket Companies rallied more than 20% Tuesday in a surprising move on no apparent new news. The online mortgage provider currently has large short bets placed against it by hedge funds and appears to have garnered some bullish interest from day traders on Reddit’s infamous WallStreetBets.

Nearly 40% of its available shares are sold short and it is near the top of the list of U.S. companies in terms of size of short bet by hedge funds, according to FactSet. That makes it classic target by meme-obsessed investors, who have been storming together this year into shares and call options of heavily shorted companies in order to squeeze out short sellers. It was unclear of the size of the retail interest in Rocket at this time.

A number of popular posts on WallStreetBet chatroom featured Rocket on Tuesday. One says “I like RKT. $1.7M all-in, let’s gooo YOLO,” and it quickly drew more than 1,700 comments.

“It’s 38% short … When people see that, they think you can bust the sellers,” CNBC’s Jim Cramer said on “Squawk on the Street,” while adding he actually likes Rocket Companies’ management and business fundamentals. 

“I have been a huge fan of [CEO] Jay Farner and [Chairman] Dan Gilbert .. and frankly don’t understand why the stock did not react to what was a very good where they basically laid out a story that just said, ‘We can show how when rates go up, it has not hurt our business. When rates go down, it’s not hurt our business.'”

The surge in Rocket could be a sign that the retail trading mania seen in GameStop earlier this year is still a factor. A month ago, an army of retail investors on Reddit managed to push the brick-and-mortar video game retailer up 1,500% in two weeks, inflicting huge pain for short selling hedge funds. The broader market also experienced some spill-over impact from the frenzy as many big investors took down risk across the board.

When a stock with high short interest jumps sharply higher, it could force short sellers to cover their bearish positions in order to limit their losses. The short covering tends to fuel the stock’s rally further.

Rocket reported stronger-than-expected fourth-quarter earnings on Thursday, which impressed some Wall Street analysts. Wells Fargo raised its price target slightly and moved up its earnings estimate for Rocket following its big beat.

“We were impressed with Q4 earnings, particularly the resilience of their direct to consumer retail GOS margins,” Donald Fandetti, Wells analyst, said in a note on Monday. “RKT seems to be well positioned to take market share if the environment gets more dislocated from higher rates.”

— CNBC’s Kevin Stankiewicz contributed reporting.

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Business

‘Big Short’ investor Michael Burry says the stock market is ‘dancing on a knife’s edge’ – and fears he’s being ignored again

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Christian Bale as Michael Burry in “The Big Short.”

The Big Short/Netflix

  • Michael Burry sounded the alarm on the stock market over the weekend.
  • The “Big Short” investor said extreme speculation and debt could cause a crash.
  • Burry said his warnings were being ignored as they were during the housing bubble.
  • Visit Business Insider’s homepage for more stories.

Rampant speculation and widespread betting with borrowed money have driven the stock market to the brink of collapse, Michael Burry said over the weekend.

“Speculative stock #bubbles ultimately see the gamblers take on too much debt,” the investor tweeted along with a chart showing the S&P 500 index and levels of margin debt both soaring in recent months.

“The market is dancing on a knife’s edge,” Burry added.

Burry said the flow of cash from actively managed funds to index trackers and the boom in day traders sharing tips on social media and touting meme stocks had helped to fuel the market upswing.

“Passive investing’s IQ drain, and #stonksgoup hype, add to the danger,” he said.

In another tweet, the Scion Asset Management chief highlighted a “massive spike” in the volume of bullish call options being traded. He added the hashtags #cautiontothewind and #blowofftop to emphasize his view that those types of wagers are propelling stocks to extreme levels.

Burry is best known for his billion-dollar bet on a crash in the US housing market in the mid-2000s, immortalized in “The Big Short.” Christian Bale portrayed him in the movie adaptation of the book.

The investor also laid the groundwork for the GameStop short squeeze when he backed the video-game retailer in 2019 and wrote several letters to its bosses.

Burry tweeted on Sunday that his latest warning was being ignored just as Wall Street dismissed his warnings during the housing bubble.

“People say I didn’t warn last time,” he said. “I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.”

Burry doubled down on his view by adding that quote to his Twitter bio. His display name is Cassandra, a reference to the priestess from Greek mythology who was cursed to share true prophecies but never to be believed.

Read more: Bank of America says buy these 14 cheap stocks that are best positioned to soar on the strongest economic comeback in nearly 40 years



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Business

YouTube, Reddit User ‘Roaring Kitty’ Gets Sued for Securities Fraud Over GameStop Short Squeeze

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Photo: Michael M. Santiago (Getty Images)

Keith Gill, also known as “Roaring Kitty” on Twitter/YouTube and “DeepFuckingValue” on Reddit, is facing a proposed class action lawsuit for his role in the massive GameStop short squeeze orchestrated by Reddit’s r/WallStreetBets board, Bloomberg reported on Wednesday.

According to Bloomberg, the suit was filed by Hagens Berman Sobol Shapiro, a securities class action firm, on behalf of Washington state’s Christian Iovin, who sold $200,000 in call options on GameStop stock when it was worth below $100 a share. This proved to be a very bad bet, as users on r/WallStreetBet launched an organized effort to pump GameStop and other poorly-performing stocks, like AMC and BlackBerry, with nostalgia value that ultimately was quite successful. As major Wall Street sharks quickly got clued into and joined the Reddit-driven effort, shares in GameStop spiked to $483, spelling disaster for traders short-selling the company’s stock. Iovin was forced to buy back his calls at inflated rates as a result, according to the suit. GameStop now stands at $46 per share, still significantly higher at the beginning of 2021, when it was trading in the $19 range.

Gill was one of the leading proponents of the rush on GameStop on his social media accounts, and according to CNBC, posted to Reddit that he made at least $7.8 million on the company’s stock. The suit accuses him of not being some layman, but a licensed securities broker that deliberately manipulated the price of the company’s stock to get rich quick.

“Gill’s deceitful and manipulative conduct not only violated numerous industry regulations and rules, but also various securities laws by undermining the integrity of the market for GameStop shares,” the class action proposal said, according to Bloomberg. “He caused enormous losses not only to those who bought option contracts, but also to those who fell for Gill’s act and bought GameStop stock during the market frenzy at greatly inflated prices.”

According to the New York Times, the class action proposal cites Gill’s multiple broker licenses and also names MassMutual’s brokerage arm—where Gill worked until a few weeks ago, and which the plaintiffs claim failed to properly rein in his market activities. Times also noted that securities regulators in the state of Massachusetts are looking into whether his posts potentially violated the law or industry rules. (The Securities and Exchange Commission has issued vague threats to everyone involved involved in the speculative frenzy, including stock-trading app Robinhood, but hasn’t actually carried them out.)

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Gill is strenuously fighting claims he was trying to manipulate the market to his own benefit. The short squeeze was only possible because hedge funds like Melvin Capital had taken out greedily large short positions on GameStop, presenting an opportunity for investors to make big money if the stock rose while the hedge funds lost their shirts. The House Financial Services Committee is holding a hearing on Thursday over the whole r/WallStreetBets fiasco, with Gill scheduled to testify. Others scheduled to speak include Robinhood co-CEO Vlad Tenev, Reddit CEO and co-founder Steve Huffman, and Melvin Capital CEO Gabriel Plotkin.

In his prepared remarks to the House, Gill claimed that his position as Director of Financial Wellness Education at MassMutual had been totally unconnected to his side gig as a stock market commentator and that he had genuinely believed GameStop had “the potential to reinvent itself as the ultimate destination for gamers within the thriving $200 billion gaming industry.” Gill added that as of just a few months ago in December 2020, his YouTube and Twitter accounts had just a few hundred followers each and he did not believe he had the capability to sway markets.

“The idea that I used social media to promote GameStop stock to unwitting investors is preposterous,” Gill wrote. “I was abundantly clear that my channel was for educational purposes only, and that my aggressive style of investing was unlikely to be suitable for most folks checking out the channel. Whether other individual investors bought the stock was irrelevant to my thesis—my focus was on the fundamentals of the business.”

Gill added that “others will have to explain” exactly what happened with GameStop.

“Here’s the thing: I’ve had a bit of experience and even I barely understand these matters,” he wrote. “It’s alarming how little we know about the inner-workings of the market, and I am thankful that this Committee is examining what happened.”

Gill’s attorney, William Taylor, declined to comment to the Times, while MassMutual told the paper it is looking into the matter.

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Goldman says the stock market is undergoing its biggest short squeeze in 25 years – and that has hedge funds dumping stock exposure at the fastest rate since 2009

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Xinhua News Agency/Getty Images

  • The US stock market has seen its biggest short squeeze in 25 years over a trailing three-month period, according to Goldman Sachs.
  • The culmination of this came this past week, when hedge funds withdrew from the market at the fastest rate since 2009, the firm said.
  • Day traders have driven up shares GameStop and other heavily shorted stocks in recent weeks, costing short-sellers billions.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell. 

The US stock market has experienced its biggest short squeeze in 25 years over the past three months, according to Goldman Sachs.

It all came to a head this past week amid the GameStop madness that forced hedge funds to dump stock holdings at the fastest rate since 2009, the firm found.

GameStop shares spiked 400% just last week – and 1,625% across all of January – squeezing hedge funds and others who had bet against the stock, costing them billions of dollars. A short position is a bet that a share price will fall. Estimates by data provider Ortex on Friday showed that short-sellers were sitting on losses of around $19 billion just on GameStop in 2021 so far.

The surge in GameStop and other heavily shorted stocks was driven by users of the Reddit forum Wall Street Bets, who forced up the price in an effort to make themselves money but also to hammer hedge funds such as Melvin Capital. They had to buy shares in companies such as GameStop and movie theater chain AMC to close their short positions, and sell other stocks to cover their losses.

Read more: Buy these 26 heavily shorted stocks as retail traders trigger wild rallies in Wall Street’s least-liked names, Wells Fargo says

The activity was the culmination of a three-month span that saw basket of the most-shorted US stocks rally 98%, far outpacing similarly aggressive squeezes seen in 2000 and 2009. 

“Funds in their coverage sold long positions and covered shorts in every sector,” said David Kostin, Goldman’s chief US equity strategiest.

Kostin and his colleagues said regulations, limits put in place by trading platforms, or sharp losses could bring the amateur trading frenzy to a halt.

“Otherwise, an abundance of US household cash should continue to fuel the trading boom,” they said.

Goldman said retail investing was thriving because of the large amount of savings built up during the coronavirus period, as well as government stimulus.

“During 2020 credit card debt declined by more than 10%, checking deposits grew by $4 trillion, and savings grew by $5 trillion,” the investment bank’s analysts said.

“On top of these savings, our economists expect more than $1 trillion in additional fiscal support in coming months, including another round of direct checks.”

Read more: Jefferies says these 20 heavily shorted and lightly traded stocks could see big jumps in the event of a GameStop-like squeeze

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