BTFD, unless its Robinhood
Who doesn’t love a good dip at Christmas?
Shares of GameStop and AMC Entertainment on Tuesday both bounced back from Monday’s plummet, advancing 7.9% and 5.4%, respectively, as retail investors keyed the move with their long held investment thesis of BTFD, or “buy the f’ing dip.”
After GameStop dropped almost 14% and AMC dropped more than 15% to start the week, furious retail investors were back Tuesday supporting some of their favorite tickers.
However, the volume growth of short interest on both stocks was much higher on Tuesday than it was the day previous. Neither meme stock broke the 1% mark on Monday but short interest in GameStop was up more than 7% at Tuesday’s close, and AMC’s short volume rose more than 3.5%, according to data from Ortex.
Fidelity data showed a more narrow [albeit still very wide] buy-to-sell ratio on both stocks compared with Monday. Buy-to-sell ratios are closely watched by the meme crowd because they can be a gauge of investor sentiment.
The upswing for the popular memes comes as U.S. stock indexes posted back-to-back losses Tuesday and with nearly everyone in finance waiting on the Federal Reserve to announce where it stands on tapering its bond purchases Wednesday.
What impact reduced asset purchases by America’s central bank would potentially have on retail “Apes” HODLing meme stocks remains something of a thought experiment, not to mention the Fed’s eventual lifting of policy rates. [We’re placing our bets on “not much.”] But that action could have a major impact on short-sellers who could be living in a much more target-rich environment, particularly if struggling companies feel the actual pinch of pandemic-era liquidity beginning to drain from financial markets. There’s also the Justice Department wildcard.
But what might be most interesting about Tuesday’s action is that both “mother meme stocks” moved in the opposite direction that the data would indicate if compared side-by-side, meaning the real action remains almost entirely in every kind of options trade fathomable.
And we also liked that they moved together because that’s our kink now, and it’s nice to see everyone in MemeLand get along, even if just for a day.
We’d be remiss not to also include note that quasi-embattled AMC CEO Adam Aron fired off an unsubtle happy tweet near the closing bell, inviting his AMC Apes to the movies this weekend…but not Spider-Man.
Speaking of plunging stocks that have benefited from a long and low interest-rate environment, let’s check in on Robinhood.
The zero-commission trading app, which in retrospect might have been the face tattoo moment of our descent into cheap money addiction, closed down 2.9% on Tuesday at $19.13, a 49.6% drop from its IPO price in July.
And when your stock is almost 50% below its IPO price before the SEC comes after your “payment for order flow” business model [which many inside the Beltway and Wall Street think will happen, in some form, in 2022], that’s not great.
But Robinhood, which is possibly reaping the whirlwind for introducing a new generation of retail investors to “free” options trading and then ticking them off right before the IPO, already has become a darling to short-sellers.
Shorting Robinhood over the summer was not cheap with the company’s borrowing rate in the nosebleed 75% range, meaning shares would have had to plummet fast for short bets to pay off. But now the rapidly falling share price has not just paid out, it’s lowered the barrier of entry to less-wealthy investors looking to short HOOD.
50% in less than five months? That makes a lot of short-sellers very merry, and can turn some very unmerry former Robinhood users into short-sellers.
And we don’t see a lot of dip buyers here in a name that has been down steadily since mid-August. Guess that’s what happens when you kill the MoASS…
Per a Tuesday press release from the Trump Media & Technology Group, which is totally a thing because it’s going public with a $1 billion PIPE from Digital World Acquisition Corp.:
Trump Media & Technology Group, today announced that it has entered into a wide-ranging technology and cloud services agreement with Rumble Inc. As part of the partnership, Rumble will deliver video and streaming for TRUTH Social. TMTG and Rumble are also in exclusive negotiations for Rumble to provide infrastructure and video delivery services for TMTG’s Subscription Video On-Demand product, TMTG+.
That’s cool. TMTG and incoming CEO/outgoing congressman Devin Nunes will get to outsource how he distributes all that premium content to TMTG+ subscribers…once he has any content– or a plan to produce that content.
But it’s also cool for Rumble, which is also going public via a SPAC called CF Acquisition Corp VI.Shares in the conservative answer to YouTube’s SPAC spiked by more than 15% after the bell Tuesday, begging the question: why not just invest in Rumble?
Oh, who are we kidding? No one is buying DWAC/TMTG for the airtight business model or the warrants that are essentially a retail investment hand grenade that you can hold on your Fidelity account once the SEC gives up and lets this thing get merged and listed.
TMTG is the purest growth story of all time: no product, huge valuation, fascinating hires, deals before launch. It makes Snapchat’s entrance to public markets look like the D-Day invasion…and it’s trading at 5x on partisan sentiment.