A David and Goliath saga is unfolding in financial markets over the stock price of struggling retail chain GameStop. On Wednesday, Goliath walked away from the battle.
Two Goliaths, actually.
A pair of professional investment firms that placed big bets that money-losing video game retailer GameStop’s stock will crash have essentially admitted defeat. The victor, for now at least, is a volunteer army of smaller investors who have been rallying on Reddit and elsewhere online to support GameStop’s stock and beat back the professionals.
GameStop’s stock surged as high as US$380 Wednesday morning, after sitting below $18 just a few weeks ago.
One of the two major investors that surrendered, Citron Research, acknowledged Wednesday in a YouTube video that it unwound the majority of its bet that GameStop stock would fall. Andrew Left, who runs Citron, said it took “a loss, 100%” to do so, but that does not change his view that GameStop’s stock will eventually fall sharply.
“We move on. Nothing has changed with GameStop except the stock price,” Left said. He also said he “has respect for the market,” which can temporarily run stock prices up higher than critics think they should go.
Melvin Capital is also exiting GameStop, with manager Gabe Plotkin telling CNBC that the hedge fund was taking a significant loss. He denied rumours that the hedge fund will fail.
The size of the losses taken by Citron and Melvin are unknown.
GameStop’s stock has long been the target of investors betting that its stock will fall as it struggles in an industry increasingly going online. The retailer lost $1.6 billion over the last 12 quarters, and its stock fell for six straight years before rebounding in 2020.
That pushed investors to sell GameStop’s stock short. Essentially, these short sellers borrowed shares of GameStop and sold them in hopes of buying them back later at a lower price and pocketing the difference. GameStop is one of the most shorted stocks on Wall Street.
But its stock began rising sharply earlier this month after a co-founder of Chewy, the online retailer of pet supplies, joined the company’s board. The thought is that he could help in the company’s digital transformation.
At the same time, smaller investors gathering on social media have been exhorting each other to keep pushing the stock higher. There is no overriding reason why GameStop has attracted those smaller investors, but there is a distinct component of revenge against Wall Street in communications online.
“The hedge fund owners are crying as a result of us,” one user wrote on a Reddit discussion about GameStop stock. “We have the power in this situation, not anyone else as long as we stay strong!”
Almost immediately after, another user shouted in all capital letters, “BUY AND HOLD WE WILL BE VICTORIOUS.”
The battle has created big losses for major Wall Street players who shorted the stock. As GameStop’s stock soared and some of the critics got out of their bets, they had to buy GameStop shares to do so. That can accelerate gains even more, creating a feedback loop. As of Tuesday, the losses had already topped $5 billion in 2021, according to S3 Partners.
Much of professional Wall Street remains pessimistic that GameStop’s stock can hold onto its moonshot gains.
Analysts at BofA Global Research raised their price target for GameStop on Wednesday from $1.60, all the way up to $10. It was at $362 in midday trading.
Nevertheless, the phenomenon does not appear to be fading.
AMC Entertainment Holdings Inc., the theatre chain that has been ravaged by the pandemic, posted a quarterly loss this month exceeding $900 million.
It appears, however, that AMC has become the next battleground in the fight between smaller, retail investors, and Wall Street.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
