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The SEC Finally Says Enough to One Social Media-Fueled Trade – Barron's

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The SEC ordered a trading halt in SpectraScience stock because of a coordinated attempt to manipulate stock prices on social media. (Photo by SAUL LOEB / AFP)


AFP via Getty Images

The Securities and Exchange Commission finally ordered a trading halt in a stock because of a coordinated attempt to manipulate stock prices on social media. Sound familiar? It should to anyone that followed the

GameStop

saga. But this time the social-media mob wasn’t targeting a dying company—it was touting a dead one.

That company is

SpectraScience,

which hasn’t filed annual or quarterly reports for years. The company’s market capitalization is about $11 million and its stock trades at a fraction of a penny, but it was up about 450% over the past month.

Then the SEC halted trading, on what looked to be a good, old-fashioned pump-and-dump scheme.

It goes like this: A position is built slowly in a small, thinly traded stock. The stock starts to rise, the gains are touted, and new investors drive prices even higher. The original buyers sell into the strength—and new investors are left holding the bag. If that is what happened here, it would be considered a crime.

The SEC’s action is also a warning to all investors that chasing stocks based on nothing more than a social-media post is a risky trading strategy. Remember the adage from experienced poker players: If you can’t identify the sucker at the table, it’s you.

Al Root

*** Want more market news from Barron’s? Every weekday we highlight the consequential market news of the day and explain what’s likely to matter tomorrow in our Review & Preview newsletter. Sign up here.

***

Pot Stocks Surged; Then They Plunged

For months, pot stocks have rallied as investors bet on the chances of changing U.S. federal cannabis laws. On Thursday, shares in cannabis companies fell back to earth.

  • Canadian marijuana stocks

    Tilray,


    Aphria,


    Aurora Cannabis

    and

    Canopy Growth

    all saw double-digit drops, with Tilray shaving nearly 50% off its value and erasing all its gains from the previous day.


  • ETFMG Alternative Harvest,

    an exchange-traded fund with exposure to the pot business, dipped nearly 25% Thursday, but is still up almost 75% year-to-date.
  • It’s hard to pinpoint a reason for Thursday’s drop. Some analysts note that Reddit traders who caused huge fluctuations in so-called meme stocks moved on to pot stocks. That could be the case: Shares of Canadian-based growers hyped on social media have soared while U.S.-based stocks that weren’t have been calm.
  • Democrats’ commitment to using their new Senate majority to overhaul U.S. marijuana laws has been the key driver of the pot-stock rally in recent weeks. A raft of state-level measures allowing or expanding pot legalization passed last fall. While President Joe Biden doesn’t support federal legalization, he supports decriminalization.

What’s Next: One of the top posts on Reddit’s WallStreetBets forum on Thursday morning likened the recent action in Canadian pot stocks to a casino. Given GameStop’s trajectory, that attention “should be cautionary,” Cantor Fitzgerald analyst Pablo Zuanic told Barron’s.

—Ben Walsh

***

Fauci Estimates That All Americans Will Be Eligible for Coronavirus Vaccinations in April

As the U.S. vaccination effort continues to ramp up, Dr. Anthony Fauci said Thursday that by April it would be “open season” on Covid-19 vaccine eligibility in the U.S.

  • “Virtually everybody and anybody in any category could start to get vaccinated” by April, Dr. Fauci, the nation’s top infectious disease expert, said on NBC’s Today Show.
  • Vaccine eligibility varies by state but is currently largely restricted to certain occupations, like healthcare workers and essential workers, people 65 or older, and others with health conditions that put them at increased risk for severe outcomes.
  • While shortages remain a problem, the Biden administration said Thursday that it had secured enough doses to vaccinate 300 million Americans by the end of July. Currently, 10.5% of the U.S. population has received at least one dose.
  • U.S. Covid-19 hospitalizations have fallen 40% in the past month, while the seven-day average of Covid-19 deaths, a lagging indicator, has fallen to its lowest level in a month.

What’s Next: Even as conditions improve, the prevalence of more transmissible variants concerns health officials. In Florida, for instance, the B-117 mutation first found in the U.K. is causing cases to spike.

—Ben Walsh

***

Disney Posts a Surprise Profit as Disney+ Keeps Racking Up Subscribers

Media and entertainment giant

Walt Disney’s

latest quarterly results showed that its legacy businesses are recovering ahead of schedule, while growth at Disney+ continues to accelerate.

  • Disney managed to turn a profit of 2 cents per share, compared with the 71-cent loss Wall Street analysts had forecast. Revenue also beat estimates at $16.3 billion versus the $15.9 billion expected.
  • Disney+ added 21 million paid subscribers in the quarter, to start 2021 with almost 95 million subscribers worldwide—up from 26.5 million a year ago. Revenue for Disney’s streaming business overall rose 73% year over year, to $3.5 billion.
  • The pandemic is still weighing heavily on Disney’s theme parks and cruises, where revenues fell 53% for the quarter, to $3.6 billion. That’s better than earlier in 2020, an improvement CEO Bob Chapek credits to the company’s Covid-19 protocols that have allowed it to boost attendance safely.
  • Disney stock rose 1.4% in premarket trading Friday, to about $193.50. The stock is up about 36% over the past year.

What’s Next: The price of Disney+ in the U.S. will increase by $1 a month, to $7.99, starting in March, while other countries will see similar increases in their local currencies.

Nicholas Jasinski

***

Trump’s Defense Is Up Next in Impeachment Trial

House Democrats wrapped up their case on the third day of former President Donald Trump’s impeachment trial. The defense team will respond Friday afternoon.

  • Pointing to comments from rioters, the prosecutors sought to demonstrate that the storming of the Capitol was done at Trump’s instruction.
  • Rep. Jamie Raskin (D-Md.) argued that if Trump isn’t held accountable for a high crime and misdemeanor it would set a “new terrible standard for presidential misconduct.”
  • “Let’s not get caught up in a lot of outlandish lawyers’ theories here,” Raskin said. “Exercise your common sense about what just took place in our country.”
    What’s Next:
    Trump’s defense team will make their case Friday. Multiple outlets reported the former president’s lawyers anticipate wrapping up their arguments in one day.

—Connor Smith

***

Amsterdam Overtakes London as Europe’s Top Stock-Trading Venue

The Dutch capital is displacing London as the exchange of choice to trade European shares and derivatives, in one of the first major financial consequences of Britain leaving Europe’s single market at the beginning of the year.

  • Amsterdam stock exchanges have seen more than €9 billion ($11 billion) worth of shares traded a day during January, up from a daily €2.6 billion in 2020, according to data released this week. That compares with €8.6 billion of trades in London last month, down from €17.5 billion last year.
  • Meanwhile the trading of euro-denominated swaps—a key derivative—dropped from 40% of the market last year to 10% in January, according to an IHS Markit survey.
  • The trading of carbon emission permit is also gradually moving away from London, according to industry professionals.
  • The changes have been triggered by the absence of dispositions for financial services in the EU-UK trade deal signed late last year, with the EU now insisting that euro-denominated trades have to be supervised and regulated by European bodies.

What’s Next: After a major shift in January, the outflows will slow in the coming months but the trend is unlikely to reverse. And Brussels, playing for time, will wait until more business has moved to the continent before it starts granting U.K. financial players the regulatory equivalence authorizations to do business in the EU.

—Pierre Briançon

***

Do you remember this week’s news? How well do you know your Wall Street history? Take our quiz below about this week’s news and an additional question to commemorate Barron’s turning 100 this year. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. Tom Brady, at 43, led the Tampa Bay Bucs to a Super Bowl win during his first year with the team. How many times has Brady won a Super Bowl during his career?

a. 5 times

b. 6 times

c. 7 times

d. 8 times

2.

Tesla

just bought $1.5 billion in Bitcoin and the electric-vehicle company expects to start accepting Bitcoin as payment for its products soon. Bitcoin prices jumped on the news. Which company currently accepts Bitcoin for payment?

a.

Overstock.com


b.

Dell Technologies


c.

Macy’s


d. None of the above

3. Which San Francisco-based company and tenant of the city’s tallest building announced that more than half of its 50,000-plus global employees will work remotely at least part-time?

a.

Wells Fargo


b.

Salesforce.com


c.

Gap


d.

Prologis

4. Which company got FDA clearance this week for a combination of two of its antibody-based drugs to treat recently diagnosed Covid-19 in high risk patients?

a. Regeneron

b. Merck

c.

Eli Lilly


d.

Pfizer

5. Which airline announced this week that it plans to buy up to 200 flying taxis valued at $1 billion from an electric aircraft start-up, Archer, which itself announced plans to become a public company via a combination with a SPAC?

a.

United Airlines


b.

American Airlines Group


c.

Southwest Airlines


d.

Delta Air Lines

100 Years of Barron’s
6. Which electric-powered passenger car did

General Motors

introduce, and kill off, in the 1990s?

a. The Bolt

b. The CitiCar

c. The EV1

d. The Starlite

Answers: 1(c); 2(a); 3(b); 4(c); 5(a); 6(c)

Pauline Yuelys and Kenneth G. Pringle

***

—Newsletter edited by Matt Bemer, Anita Hamilton, Ben Levisohn, Stacy Ozol, Mary Romano

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What to stream this weekend: ‘Civil War,’ Snow Patrol, ‘How to Die Alone,’ ‘Tulsa King’ and ‘Uglies’

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Hallmark launching a streaming service with two new original series, and Bill Skarsgård out for revenge in “Boy Kills World” are some of the new television, films, music and games headed to a device near you.

Also among the streaming offerings worth your time as selected by The Associated Press’ entertainment journalists: Alex Garland’s “Civil War” starring Kirsten Dunst, Natasha Rothwell’s heartfelt comedy for Hulu called “How to Die Alone” and Sylvester Stallone’s second season of “Tulsa King” debuts.

NEW MOVIES TO STREAM SEPT. 9-15

Alex Garland’s “Civil War” is finally making its debut on MAX on Friday. The film stars Kirsten Dunst as a veteran photojournalist covering a violent war that’s divided America; She reluctantly allows an aspiring photographer, played by Cailee Spaeny, to tag along as she, an editor (Stephen McKinley Henderson) and a reporter (Wagner Moura) make the dangerous journey to Washington, D.C., to interview the president (Nick Offerman), a blustery, rising despot who has given himself a third term, taken to attacking his citizens and shut himself off from the press. In my review, I called it a bellowing and haunting experience; Smart and thought-provoking with great performances. It’s well worth a watch.

— Joey King stars in Netflix’s adaptation of Scott Westerfeld’s “Uglies,” about a future society in which everyone is required to have beautifying cosmetic surgery at age 16. Streaming on Friday, McG directed the film, in which King’s character inadvertently finds herself in the midst of an uprising against the status quo. “Outer Banks” star Chase Stokes plays King’s best friend.

— Bill Skarsgård is out for revenge against the woman (Famke Janssen) who killed his family in “Boy Kills World,” coming to Hulu on Friday. Moritz Mohr directed the ultra-violent film, of which Variety critic Owen Gleiberman wrote: “It’s a depraved vision, yet I got caught up in its kick-ass revenge-horror pizzazz, its disreputable commitment to what it was doing.”

AP Film Writer Lindsey Bahr

NEW MUSIC TO STREAM SEPT. 9-15

— The year was 2006. Snow Patrol, the Northern Irish-Scottish alternative rock band, released an album, “Eyes Open,” producing the biggest hit of their career: “Chasing Cars.” A lot has happened in the time since — three, soon to be four quality full-length albums, to be exact. On Friday, the band will release “The Forest Is the Path,” their first new album in seven years. Anthemic pop-rock is the name of the game across songs of love and loss, like “All,”“The Beginning” and “This Is the Sound Of Your Voice.”

— For fans of raucous guitar music, Jordan Peele’s 2022 sci-fi thriller, “NOPE,” provided a surprising, if tiny, thrill. One of the leads, Emerald “Em” Haywood portrayed by Keke Palmer, rocks a Jesus Lizard shirt. (Also featured through the film: Rage Against the Machine, Wipers, Mr Bungle, Butthole Surfers and Earth band shirts.) The Austin noise rock band are a less than obvious pick, having been signed to the legendary Touch and Go Records and having stopped releasing new albums in 1998. That changes on Friday the 13th, when “Rack” arrives. And for those curious: The Jesus Lizard’s intensity never went away.

AP Music Writer Maria Sherman

NEW SHOWS TO STREAM SEPT. 9-15

— Hallmark launched a streaming service called Hallmark+ on Tuesday with two new original series, the scripted drama “The Chicken Sisters” and unscripted series “Celebrations with Lacey Chabert.” If you’re a Hallmark holiday movies fan, you know Chabert. She’s starred in more than 30 of their films and many are holiday themed. Off camera, Chabert has a passion for throwing parties and entertaining. In “Celebrations,” deserving people are surprised with a bash in their honor — planned with Chabert’s help. “The Chicken Sisters” stars Schuyler Fisk, Wendie Malick and Lea Thompson in a show about employees at rival chicken restaurants in a small town. The eight-episode series is based on a novel of the same name.

Natasha Rothwell of “Insecure” and “The White Lotus” fame created and stars in a new heartfelt comedy for Hulu called “How to Die Alone.” She plays Mel, a broke, go-along-to-get-along, single, airport employee who, after a near-death experience, makes the conscious decision to take risks and pursue her dreams. Rothwell has been working on the series for the past eight years and described it to The AP as “the most vulnerable piece of art I’ve ever put into the world.” Like Mel, Rothwell had to learn to bet on herself to make the show she wanted to make. “In the Venn diagram of me and Mel, there’s significant overlap,” said Rothwell. It premieres Friday on Hulu.

— Shailene Woodley, DeWanda Wise and Betty Gilpin star in a new drama for Starz called “Three Women,” about entrepreneur Sloane, homemaker Lina and student Maggie who are each stepping into their power and making life-changing decisions. They’re interviewed by a writer named Gia (Woodley.) The series is based on a 2019 best-selling book of the same name by Lisa Taddeo. “Three Women” premieres Friday on Starz.

— Sylvester Stallone’s second season of “Tulsa King” debuts Sunday on Paramount+. Stallone plays Dwight Manfredi, a mafia boss who was recently released from prison after serving 25 years. He’s sent to Tulsa to set up a new crime syndicate. The series is created by Taylor Sheridan of “Yellowstone” fame.

Alicia Rancilio

NEW VIDEO GAMES TO PLAY

— One thing about the title of Focus Entertainment’s Warhammer 40,000: Space Marine 2 — you know exactly what you’re in for. You are Demetrian Titus, a genetically enhanced brute sent into battle against the Tyranids, an insectoid species with an insatiable craving for human flesh. You have a rocket-powered suit of armor and an arsenal of ridiculous weapons like the “Chainsword,” the “Thunderhammer” and the “Melta Rifle,” so what could go wrong? Besides the squishy single-player mode, there are cooperative missions and six-vs.-six free-for-alls. You can suit up now on PlayStation 5, Xbox X/S or PC.

— Likewise, Wild Bastards isn’t exactly the kind of title that’s going to attract fans of, say, Animal Crossing. It’s another sci-fi shooter, but the protagonists are a gang of 13 varmints — aliens and androids included — who are on the run from the law. Each outlaw has a distinctive set of weapons and special powers: Sarge, for example, is a robot with horse genes, while Billy the Squid is … well, you get the idea. Australian studio Blue Manchu developed the 2019 cult hit Void Bastards, and this Wild-West-in-space spinoff has the same snarky humor and vibrant, neon-drenched cartoon look. Saddle up on PlayStation 5, Xbox X/S, Nintendo Switch or PC.

Lou Kesten

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Trump could cash out his DJT stock within weeks. Here’s what happens if he sells

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Former President Donald Trump is on the brink of a significant financial decision that could have far-reaching implications for both his personal wealth and the future of his fledgling social media company, Trump Media & Technology Group (TMTG). As the lockup period on his shares in TMTG, which owns Truth Social, nears its end, Trump could soon be free to sell his substantial stake in the company. However, the potential payday, which makes up a large portion of his net worth, comes with considerable risks for Trump and his supporters.

Trump’s stake in TMTG comprises nearly 59% of the company, amounting to 114,750,000 shares. As of now, this holding is valued at approximately $2.6 billion. These shares are currently under a lockup agreement, a common feature of initial public offerings (IPOs), designed to prevent company insiders from immediately selling their shares and potentially destabilizing the stock. The lockup, which began after TMTG’s merger with a special purpose acquisition company (SPAC), is set to expire on September 25, though it could end earlier if certain conditions are met.

Should Trump decide to sell his shares after the lockup expires, the market could respond in unpredictable ways. The sale of a substantial number of shares by a major stakeholder like Trump could flood the market, potentially driving down the stock price. Daniel Bradley, a finance professor at the University of South Florida, suggests that the market might react negatively to such a large sale, particularly if there aren’t enough buyers to absorb the supply. This could lead to a sharp decline in the stock’s value, impacting both Trump’s personal wealth and the company’s market standing.

Moreover, Trump’s involvement in Truth Social has been a key driver of investor interest. The platform, marketed as a free speech alternative to mainstream social media, has attracted a loyal user base largely due to Trump’s presence. If Trump were to sell his stake, it might signal a lack of confidence in the company, potentially shaking investor confidence and further depressing the stock price.

Trump’s decision is also influenced by his ongoing legal battles, which have already cost him over $100 million in legal fees. Selling his shares could provide a significant financial boost, helping him cover these mounting expenses. However, this move could also have political ramifications, especially as he continues his bid for the Republican nomination in the 2024 presidential race.

Trump Media’s success is closely tied to Trump’s political fortunes. The company’s stock has shown volatility in response to developments in the presidential race, with Trump’s chances of winning having a direct impact on the stock’s value. If Trump sells his stake, it could be interpreted as a lack of confidence in his own political future, potentially undermining both his campaign and the company’s prospects.

Truth Social, the flagship product of TMTG, has faced challenges in generating traffic and advertising revenue, especially compared to established social media giants like X (formerly Twitter) and Facebook. Despite this, the company’s valuation has remained high, fueled by investor speculation on Trump’s political future. If Trump remains in the race and manages to secure the presidency, the value of his shares could increase. Conversely, any missteps on the campaign trail could have the opposite effect, further destabilizing the stock.

As the lockup period comes to an end, Trump faces a critical decision that could shape the future of both his personal finances and Truth Social. Whether he chooses to hold onto his shares or cash out, the outcome will likely have significant consequences for the company, its investors, and Trump’s political aspirations.

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Arizona man accused of social media threats to Trump is arrested

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Cochise County, AZ — Law enforcement officials in Arizona have apprehended Ronald Lee Syvrud, a 66-year-old resident of Cochise County, after a manhunt was launched following alleged death threats he made against former President Donald Trump. The threats reportedly surfaced in social media posts over the past two weeks, as Trump visited the US-Mexico border in Cochise County on Thursday.

Syvrud, who hails from Benson, Arizona, located about 50 miles southeast of Tucson, was captured by the Cochise County Sheriff’s Office on Thursday afternoon. The Sheriff’s Office confirmed his arrest, stating, “This subject has been taken into custody without incident.”

In addition to the alleged threats against Trump, Syvrud is wanted for multiple offences, including failure to register as a sex offender. He also faces several warrants in both Wisconsin and Arizona, including charges for driving under the influence and a felony hit-and-run.

The timing of the arrest coincided with Trump’s visit to Cochise County, where he toured the US-Mexico border. During his visit, Trump addressed the ongoing border issues and criticized his political rival, Democratic presidential nominee Kamala Harris, for what he described as lax immigration policies. When asked by reporters about the ongoing manhunt for Syvrud, Trump responded, “No, I have not heard that, but I am not that surprised and the reason is because I want to do things that are very bad for the bad guys.”

This incident marks the latest in a series of threats against political figures during the current election cycle. Just earlier this month, a 66-year-old Virginia man was arrested on suspicion of making death threats against Vice President Kamala Harris and other public officials.

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