All aboard! Just don’t be the last one to get off the rocketship. Traders are continuing to buy up tickets to memeland, sending in fairies to circle the usual darlings.
To the moon: Bed Bath & Beyond (NASDAQ:BBBY) is up another 13% premarket to around $13, after popping 40% on Monday (as a record 120.5M shares changed hands) and 30% on Friday. Yesterday, GameStop (GME) was also halted for exchange for volatility, while AMC Entertainment extended another big rally. Further outsized gains were recorded by Express (EXPR), Overstock.com (OSTK), HEXO Corp. (HEXO), Vroom (VRM), Waitr Holdings (WTRH), Wayfair (W) and CarLotz (LOTZ).
The latest catalyst appeared to sprout out of the astounding rise and fall of AMTD Digital (HKD), which surged 32,000% since going public on July 15. The offbeat Hong Kong-based fintech priced its IPO at $7.80, and while it topped out at $2,540 last week, the movement was enough to remind the WallStreetBets crowd of skyrocketing moves. AMC (AMC) also announced plans last week to issue a special dividend via preferred equity units that will trade under ticker symbol “APE,” which is an online moniker for enthusiastic meme traders. Don’t forget the recent rebound on Wall Street that has infused some risk back into the market, while heavy short interest has set the stage for a meme comeback (more than half of Bed Bath shares available for trading are now currently sold short).
Go deeper: A lot of the meme names that are now seeing a resurgence are still down heavily since the initial fever of January 2021. Some still swear by the technicals, which have created countless day trading channels and messaging platforms, while others are quick to point to the eye-popping fortunes being posted online – but don’t forget the whopping losses that get far less coverage. As an outgrowth of the YOLO trade, meming is partly a strategy (short squeeze), partly a gamble (remember binary options?) and partly a middle finger to Wall Street (little guy vs. the suits), which has been compounded by the gamification of stock apps and access to commission-free trading. (4 comments)
Semiconductor talk is resurfacing this morning ahead of President Biden’s expected signature on the CHIPS and Science Act at 10 a.m. ET. The bill is seen as a competitive win for the industry, especially with regards to China, though it is still unclear how and when the Commerce Department will review grant awards or decide to underwrite projects. The Chinese Embassy in Washington has lobbied against the legislation, saying it “firmly opposed” the bill and it had echoes of “Cold War mentality.”
Latest announcement: Micron Technology (MU) plans to invest $40B through the end of the decade to build leading-edge memory manufacturing in multiple phases in the U.S. The planned investment, the largest in memory manufacturing in American history, will ultimately create up to 40K new jobs including approximately 5K highly paid technical and operational roles. Specific expansion plans and other details will be finalized in the coming weeks.
“This legislation will enable Micron to grow domestic production of memory from less than 2% to up to 10% of the global market in the next decade, making the U.S. home to the most advanced memory manufacturing and R&D in the world,” noted CEO Sanjay Mehrotra.
Another one: Qualcomm (QCOM) has agreed to buy an additional $4.2B in semiconductor chips from GlobalFoundries’ (GFS) factory in New York. The deal specifically covers chips related to 5G wireless transceivers, Wi-Fi, automotive and Internet of Things [IoT] connectivity technologies. It will also more-than-double Qualcomm (QCOM) and GFS’s (GFS) current manufacturing agreement and bring total commitments to $7.4B in purchases through 2028.
M&A has been sidelined by fears of an incoming recession, but some are turning to dealmaking to boost growth in the current environment. Digital-news operation Axios has agreed to sell itself to its most recent lead investor, private media name Cox Enterprises. The cash deal values the company at $525M, which adds up to 5x projected 2022 revenue of more than $100M.
The thinking: Axios began a significant expansion into local news in 2020 at a time when “most commercial investors abandoned local markets.” The current deal is being constructed to ensure investments will continue to flow into local news, with “watchdog journalism so important to the health of any community.” At the moment, Axios Local operates in 24 U.S. cities, but plans to expand its coverage to 30 cities by the end of the year and eventually hopes to be in hundreds of cities.
“This is great for Axios, for our shareholders and American journalism. It allows us to think and operate generationally, with a like-minded partner – and build something great and durable that lives long after we are gone,” Axios CEO Jim VandeHei declared.
Deal structure: Axios co-founders Jim VandeHei, Roy Schwartz, and Mike Allen will continue to run Axios operations and receive financial incentives to stick around. Cox’s four seats mean it would control the board, though Axios will maintain power over Axios HQ, its communications software division that will spin out separately. Axios has been profitable for the last three years, but it is not expected to be profitable in 2022 in part due to HQ investments.
In response to Nancy Pelosi’s visit to the island, China was scheduled to wrap up military exercises surrounding Taiwan on Sunday. However, China’s Eastern Theater Command announced yesterday that it would conduct fresh drills focused on anti-submarine operations and air-to-sea strikes, suggesting that Beijing will keep up the pressure on Taiwanese defenses. Meanwhile, President Xi Jinping has laid out a template for operating ever closer to “space near Taiwan Island” after warning that its military will “never sit idly by” and “whoever plays with fire will get burnt.”
Thought bubble: A lot has changed in recent decades with a more powerful Chinese military and a new zeal to “reunite” Taiwan with the mainland. Beijing has never ruled out taking Taiwan by force and it subsequently severed some lines of communication with the U.S. – including military and climate change talks – following Pelosi’s tour of the region. China may also begin to restrict Taiwan’s freedom to operate off its shores in the same way that it squeezed the island’s ability to participate in international institutions since President Tsai Ing-wen’s election in 2016.
“I’m not worried, but I’m concerned they’re moving as much as they are,” President Biden told reporters in Delaware, referring to China. “But I don’t think they’re going to do anything more.” In the meantime, the U.S. is keeping aircraft carrier USS Ronald Reagan and its strike group “on station in the general area to monitor the situation.”
Will the tensions impact markets? An additional risk premium could be priced in for stocks related to China, Taiwan and Japan, especially after Tokyo accused Beijing of firing ballistic missiles into its exclusive economic zone. A decoupling from China would also be a lot harder than what was seen following the invasion of Ukraine, if the U.S. decides to go through with similar sanctions on the world’s second largest economy. Any crisis could quickly escalate, disrupting air traffic and shipping, as well as prompting economic warfare from tariffs and expropriations to boycotts and closures. (11 comments)
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