Meme stocks keep falling on my head….
Remember GameStop, the failing video game store chain whose shares became a meme stock that shot through the roof defying common sense? Well, meme stocks are back, or they were for a couple of days this week, after the return to social media of the original meme-stock influencer, a retail investor named Keith Gill who posts as Roaring Kitty on X. Gill posted a meme of a cartoon gamer with clips from new video games, and GameStop shares tripled before losing about half their value by Thursday. The same happened to movie chain AMC, also a target of Roaring Kitty back in 2021, and to BlackBerry. That time the meme frenzy began on the subreddit r/wallstreetbets, and shorts lost $6 billion. This time, the X-launched meme bounce cost short sellers holding GameStop and AMC about $2 billion, of which they made back about half by the time the rally ended.
“The only environment where GameStop and AMC and the likes of BlackBerry and other, I would say, trash stocks, would succeed is in an environment where anything and everything can go higher,” Longbow Asset Management CEO Jake Dollarhide told The New York Post earlier this week.
Still, the abrupt rise and fall of GameStop and AMC has netted nice profits for some investors. Quant hedge fund Renaissance Technologies bought just over 1 million shares of GameStop during the quarter ending in March, according to SEC filings. If it held on to the stake, they’d have made a profit of about $13 million — more than 50 percent — through the Wednesday decline.
The Usual Suspects: Quick takes on our faves
- Inflation is easing, with the consumer price index up only 3.4 percent in April from a year ago, in line with the Fed’s expectations, pushing stocks slightly higher and raising hopes of a rate cut by fall.
- Elon’s bad week: His Neuralink brain chips are having trouble staying put inside human brains; after firing all 500 people who work on supercharger stations, he’s begun hiring them back; a federal judge ruled Tesla has to face a lawsuit alleging Musk lied when he said self-driving technology was “just around the corner”; and Musk’s fanboys on Tesla’s board of directors are trying to convince shareholders to award their guru a 10-year, $48 billion pay package from 2018 that a judge threw out.
- McDonald’s wants to woo back customers with $5 meals, after higher prices kept many lower-income diners away. The promo will run for a month from the end of June and will be subsidized by Coke.
- TikTok may have a new owner. Billionaire Frank McCourt (the real estate mogul, not the late writer and English teacher at my high school) says he wants to remake how young people use the internet and give them back control over their personal data. He’s assembling an investment group to buy the platform after Congress told China’s ByteDance to sell or be shut out of the U.S. market.
- Disney is ditching the old folks. CEO Bob Iger said he’s cutting back spending on linear TV like ABC, whose viewers are dying off. Instead, the 73-year-old Mouse House meister says he’s focusing on Hulu and other streaming services, where Iger says the young ‘uns are.
- Comcast, in its own bid to stay relevant in a world of cable cutting, has decided to bundle Netflix, NBC’s Peacock and Apple+ for its customers at a discount to subscribing to all three separately. Comcast lost 2 million cable subscribers last year, and another half-million in the first quarter, leaving it with just 13.6 million paying cable customers at the end of March.
Red Lobster files for bankruptcy protection
America’s favorite generic seafood restaurant is having its Titanic moment. Red Lobster has filed for Chapter 11 bankruptcy protection, which is a way to keep operating while staving off creditors and trying to find a way to patch the rip in its hull. Rising costs of food and labor sent prices up, and turned away budget-conscious diners. But the iceberg here may have been Red Lobster’s own pursuit of those customers. It seems the chain completely underestimated the literal appetite of diners for its all-you-can-eat “Endless Shrimp” promotion, losing millions of dollars.
Red Lobster has recently closed at least 50 of its 650 or so locations. Sales fell last year by 8.8 percent to $2.2 billion in the U.S., and Red Lobster became the 41st-largest U.S. restaurant chain by sales last year, down from 24th in 2013. The losses prompted Red Lobster’s majority owner, seafood supplier Thai Union Group, to decide it was time to cut its losses. Red Lobster may survive, but don’t expect any more endless deals.
Meme of the Week
The Feds do NOT think John Deere’s tractor is sexy
John Deere, the maker of those green and yellow farming machines visible across rural America — and on golf courses in suburbia — has spent the past decade or so putting the squeeze on farmers in a possible violation of federal trade laws. That’s according to a right-of-repair lawsuit that’s been wending its way through federal court in Illinois for the past two years.
The suit argues that John Deere’s control of the aftermarket parts and repairs business for its tractors is an illegal restraint of trade and is killing America’s farmers. The company has more than 50 percent of the U.S. tractor market, but Deere won’t let farmers fix their own machines, requiring most part replacements to be done by a Deere technician. The real rub: Many parts are controlled by microchips that only Deere can reset. That was a big help when Chechen mercenaries looted Deere tractors in Ukraine. When they brought the tractors back home, Deere just hit a kill switch and the machines were useless. But the same kill switch is forcing farmers to pay for expensive dealer-made repairs, and updating software can mean a wait of weeks just when a crop is coming in.
The Justice Department is also investigating, citing a 1992 Supreme Court ruling that Kodak couldn’t force customers to use its techs to repair their photocopiers. Deere is also claiming ownership of the data its increasingly connected tractors collect when plowing fields, and which is used by farmers to maximize crop yields. However, Deere is starting to feel the pain of its tech-control bid. Last week’s solar storm not only gave us gorgeous Aurora Borealis sightings but also knocked out the GPS in many newer Deere tractors, forcing farmers to stop planting and… wait for a repair. Meanwhile, Deere just laid off nearly 500 workers across three factories.
Walmart watchful as Amazon starts to appear in the rear view mirror
In the race for America’s wallets, Walmart has long been the country’s largest retailer, and the biggest company by domestic revenue. Last year the company made $648 billion in sales, up 6 percent over 2022, making it a Fortune 1 company.
But now Amazon is catching up.
The online retailer had sales of $575 billion, and it’s growing at twice the rate of Walmart. The problem, Walmart executives tell The Wall Street Journal, is that while Walmart’s sales come largely from its behemoth superstores around the country, Amazon’s growth comes from its non-retail business, which allows Amazon to continue the heavy discounting that has won it market share at the expense of profits.
The pandemic didn’t help. That’s when shoppers stayed home and Amazon delivery was a lifesaver. To protect its flank, Walmart announced plans for 150 more stores, its first major store expansion in nearly a decade. And last month Walmart introduced a line of premium foods to draw higher-end customers away from Trader Joe’s and Whole Foods. In addition, it’s also adding more third-party sellers to its online sales site that compete directly with Amazon. Amid all that, the company is telling remote workers to start showing up in the office again and has also started cutting its executive staff.
Whatever it’s doing, it must be working. On Thursday, Walmart raised its full-year forecast and reported first-quarter results that beat the company’s own forecast, with shares rising 7 percent to a record high, as sales rose and online sales were up 22 percent.
Take that, Bezos! Then again, things in the mirror may be closer than they appear...
Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
