I hope you’ve been making a lot of money day-trading. 🤠
Since the entire world has been mesmerized by the GameStop story, I’ll quickly summarize how the company’s stock rose almost 2000% in 10 days of trading.
Here’s the timeline:
June 2019: A r/wallstreetbets user named deepfuckingvalue, bought $50,000 of Jan. 2021 $GME calls.
Translation: r/wallstreet bets is a subreddit where users exchange trade ideas. deepfuckingvalue was betting that the price of the GameStop stock would go up by Jan. 2021. His $50,000 bet was worth $25 million by the end of Jan. 2021.
August 2019: Michael Burry—the physician turned hedge-fund manager who made a personal profit of $100 million by betting against the housing market in 2008—discloses a 3% stake in GameStop. He also highlights that 90% of GameStops stores are cash flow positive and urges a buyback.
Translation: Michael Burry believed GameStop was trading at a bargain.
August 2020: Ryan Cohen, the billionaire founder of Chewy.com, takes a 10% stake in GameStop.
September 2020: a r/wallstreetbets member points out that GameStop has a 120% short interest. He defends the company stating that a new console cycle is approaching and that not all consoles are going 100% digital, which means GameStop could still be viable. He also mentions that the people who had shorted the stock were underwater and would be forced to cover if the stock price rose.
November 2020: a r/wallstreetbets member highlights that Melvin Capital, a hedge fund, was buying GameStop puts (betting against the company) and held it since 2016.
January 2021: GameStop adds Ryan Cohen to its board of directors. The stock goes up 13% on the news. The market believes GameStop could greatly benefit from Ryan’s e-commerce expertise.
Shortly after, the stock is up 120%. GameStop investors are viewing Ryan as a savior.
Hedge funds keep shorting GameStop to the point where the amount of stock shorted surpasses GameStop's value. 140% short, to be exact.
The retail investors continue buying.
Other hedge funds notice the activity and begin buying as well.
During the past 7 trading days, $120 billion of GameStop stock has been traded.
This resulted in a short squeeze: A short squeeze occurs when a stock jumps sharply higher, forcing traders who had bet that its price would fall to buy it to forestall even greater losses. Their scramble to buy only adds to the upward pressure on the stock's price. source: Investopedia
Soon the hedge funds that were short Gamestop were getting calls from their banks to post collateral. They had to buy Gamestop shares and raise capital by selling some of their other positions like FB and Alibaba.
On Jan 28th, brokerage firms, including Robinhood, prevented users from buying GameStop. Users were only allowed to sell it. This caused a momentary 44% selloff.
This rightfully angered many users and triggered tweets like this one:
Robinhood was planning on IPO’ing later this year. This is not the type of PR you want right before you go public.
Some traders accused Robinhood of selling their GameStop shares without their permission. Robinhood has denied this.
This summary was based on a discussion I listened to on the All-in Podcast.
I discovered Meyers Leonard when I saw the picture of him standing for the national anthem while his teammates were kneeling.
If you look closely, you’ll notice his teammates grabbing his legs in a gesture of solidarity.
Meyers supports Black Lives Matter. He’s also a patriot and greatly respects our military—his brother is a Navy SEAL.
"I [was] aware some of the backlash that could happen. I understand. However, I believe in my heart that I did the right thing," Leonard told Spears. "Our world right now is black and white. There is a line in the sand, and it says if I don't kneel, then I'm not with Black Lives Matter. That is not true."
It’s possible to share the same values as someone while holding different views.
This is important to remember in a time where stating an unpopular opinion can get you canceled. Just because a person disagrees with you doesn’t mean they’re against you and vice versa.
Speaking of similar values, I absolutely loved the following quote by Meyers:
Every day when you walk in through those doors, there are two things that nobody can ever question about you.
Your character and your work ethic.
Always be a great teammate, always be a great person and always continue to work your tail off.
Not a bad mindset to approach February with.
ChargePoint, an electric vehicle charging network, has struck a deal to merge with special-purpose acquisition company Switchback Energy Acquisition Corporation, with a market valuation of $2.4 billion. Source: TechCrunch
Ever since the huge run-up in Tesla’s stock, investors have been hungry for the next EV stock. Plus, who wouldn’t want to make money and help the environment at the same time?
ChargePoint designs, develops and manufactures hardware and accompanying software, as well as a cloud subscription platform, for electric vehicles. The company might be best-known for its branded public and semi-public charging spots that consumers use to charge their personal electric cars and SUVs, as well as its home chargers.
I spoke about SPACs last week and the risks associated with them. The Chargepoint SPAC (NYSE: SBE) is already up 180%, so it might be best to wait before starting a position. However, if you believe EV’s are the future, ChargePoint should be on your radar.
Here’s what their CEO had to say:
We’re an index for the electrification of transportation. As all of the existing automakers transition to EV it all drives demand for us.
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