• AMC Preferred Equity (APE) units are worth about a dollar today.

• Created to serve as a currency to help AMC raise capital and grow, about $37 million worth of APE units have already been sold.

• AMC shareholders and short sellers have been adopting different approaches to maximize value with APE units.

Read also: GME Stock’s Borrow Availability Is Too Low For Large Short Trades, Says This Expert

APEs, AMC's Development of the Year

We first heard about AMC Preferred Equity (APE) units during AMC Entertainment's  (AMC) - Get Free Report second-quarter earnings call. Management announced that it would issue a dividend in the form of preferred equity.

On August 19, each AMC shareholder received one APE share for each AMC share they owned. On August 22, APEs began to be publicly traded on the NYSE with a share price of $6.95.

At the debut APE's trading volume was massive. Shares were halted by volatility 10 times during the initial trading session.

The APEs were named in honor of AMC's retail shareholders. And their main goal behind the initiative to offer them was to help AMC raise enough capital to pay off its approximately $12 million debt load.

As AMC CEO Adam Aron pointed out, in addition to their debt-relief potential, APEs would be one of the company's most significant developments in 2022. The money they raised would also be useful for M&A (merger and acquisition) funds and would be key to AMC's long-term prospects.

However, for AMC to use the APEs for such purposes, it would require the approval of its shareholders. With one vote, they could approve the conversion of the APE shares to AMC shares. If that conversion doesn't happen and the two shares remain separate, there will be no dilution in AMC's common shares.

As AMC management reported during its third-quarter (Q3) earnings call, the company wrote off about $144 million of its $400 million in loans and raised roughly $37 million in equity from the sale of some of its preferred shares.

Shareholders Have Mixed Feelings About the APEs

Since APEs' public trading began, their share price has plummeted 82% from $6.95 to almost $1 per share today. APE is now a penny stock.

Shareholders, afraid of dilution, had somewhat mixed feelings about the initial proposal of preferred units. They worried that it would result in the issuance of more stock.

And short sellers were aware of this.

On the one hand, APEs put AMC in a more comfortable liquidity situation and thus lowered the risk of bankruptcy. This will help the company raise cash and pay its obligations.

On the other hand, stock offerings are almost always short-term bearish for stocks. While offerings can help the company achieve a more solid financial footing in the long term, pumping more shares into the overall float decreases the value of the existing shares.

However, even with the possibility of future dilution, it's worth noting that an AMC has bucked the typical dilution response in the past. Share issuances in 2021 made little difference in the trajectory of the company's short-term share price.

On the contrary, during periods of heavy stock dilution — January and June 2021 — AMC's share price soared.

Even so, depending on the strategy, selling APEs could make sense so that shareholders can focus on a single equity: AMC common shares.

Other APE Trading Strategies

AMC shareholders and short sellers have been exploring some trading strategies regarding APEs.

On the long side, shareholders are raising the possibility of a reverse split of the APE shares. This would add value to the common AMC stock. During the last earnings call, CEO Adam Aron was asked by shareholders about this possibility.

"It's something that's legal to do. But interestingly, an action like that would require a shareholder vote, which should remind us all since there are many shareholders on this call. This is your company. Day to day, we run it," Aron said.

On the short side, the latest Morningstar data indicates that 50.67 million APE shares were being shorted through mid-November — an increase of more than 10 million shares compared to the previous month.

This increase in demand for shorting APEs is also reflected in the stock borrowing market. Fees to borrow APEs are currently at all-time highs, averaging a rate of 10% annualized.

However, APEs can also be an arbitrage opportunity. That's what famed short investor Jim Chanos, founder of Kynikos Associates, revealed in late August when he was shorting AMC stock and long APE units.

The definition of arbitrage in investing is to simultaneously buy and sell the same asset in different markets to profit from small differences in the list price of these assets.

"We are still long the spread... It's silly. They are the same piece of paper ultimately," Chanos said.

However, since Chanos' statement regarding his arbitrage trade, APE shares have depreciated about 64%. AMC's stock has risen 4% in the same period – considering AMC's share price on November 30 trading session.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• Wall Street expects GameStop to report a considerable increase in earnings per share for the third quarter.

• GameStop's short-term focus is on achieving profitability, but to achieve that, the company must report a drastic cost reduction.

• It is estimated that the vast majority of GameStop shares are owned by retail investors.

Read also: GME Stock’s Borrow Availability Is Too Low For Large Short Trades, Says This Expert

Previewing GameStop's Fiscal Q3 Earnings

We now have a date for GameStop's  (GME) - Get Free Report fiscal third-quarter (Q3) earnings. The video game retailer will report its results on December 7 after the closing bell.

Wall Street estimates that GameStop will report a non-GAAP (generally accepted accounting practices) loss per share of 28 cents, which would represent 20% year-over-year growth.

As for revenue, the video game retailer is estimated to report $1.35 billion, which would imply a growth of only 4% year over year.

As usual, GameStop is not expected to provide formal guidance for the next quarter, nor is it making room for questions and answers during its Q3 earnings call.

However, analysts are expecting management to comment on subjects such as the company's further dive into Web3 gaming.

On the Q2 earnings call, CEO Matt Furlong noted that, in Q3, the company would receive a better supply of next-generation gaming consoles from its key suppliers. This would be a positive.

In Q2, the gaming industry suffered from tough comps. Video game publishers, console makers, and chip makers reported a considerable drop in demand after the pandemic boom times. A return to demand would be a boon for the company.

And it's possible that GameStop has made significant strides in Q3 to transform from a legacy brick-and-mortar retailer into a technology-led organization. Initiatives such as revamped stores, e-commerce sales, and digital marketplaces may already reflect a more progressive quarter.

Could GameStop Have Reached Profitability in Q3?

Until a few months ago, management had been following a turnaround plan focused on strengthening the company's tech capabilities.

Now the narrative is different. As GameStop's management made clear last quarter, the current focus has shifted to achieving short-term profitability and drastically cutting costs.

"After spending a year strengthening our assortment, infrastructure, and tech capabilities, we're now focused on achieving profitability, launching proprietary products, leveraging our brand in new ways, and investing in our stores," GameStop’s CEO Matt Furlong said.

This change in focus is due mainly to the Federal Reserve's drastic changes in interest rates and the impact this has had on capital allocation. As mentioned by GameStop Chairman Ryan Cohen, in the current high-interest rate scenario, the value of short-term cash flows is much higher than that of long-term cash flows.

Also, as pointed out during the second-quarter earnings call, profitability will come through additional revenue growth and also through continued drastic cost-cutting.

"We continue to evolve our e-commerce and digital asset offerings, storage will remain a critical piece of the company's value proposition. Taken together, we believe the aforementioned steps can help us attain profitability in the coming quarters and produce additional revenue growth over the long term," said GameStop’s CEO on the Q2 earnings call.

Besides having reported a strong reduction in SG&A (selling, general and administrative expenses) from Q1 to Q2 in July, GameStop made dramatic cuts to its staff — including the resignation of its former CFO, Mike Recupero. Between late 2021 and mid-2022, the video game retailer had hired more than 600 employees.

Therefore, it is more likely that profitability will depend on how much costs GameStop managed to reduce in fiscal Q3 rather than extra revenue generated. And based on the loss per share forecast of 28 cents by Wall Street, it still won't happen this quarter.

Even though historically the third quarter is usually not profitable, it is encouraging that in Q2 there was a reduction in quarterly cash burn. GameStop reported a net loss of $109 million, a decline of 14.3% compared to Q1 that could be partially attributed to cost-adjustment initiatives through rightsizing corporate expenditures and headcount.

Even though profitability expectations in Q3 are still not the highest, there are hopes that further SG&A costs will be reduced. This may reflect a shrinking earnings-per-share (EPS) loss and paint a clearer picture that profitability will come soon.

What GameStop's Shareholders Are Actually Excited About

GameStop's stock certainly does not behave like regular stock.

Even though expectations regarding the company's financial and operational performance are key to movements in the stock, other data will be revealed in fiscal Q3 that GameStop shareholders are paying attention to.

Over the past few quarters, GameStop investors have been adopting a strategy of registering their shares directly through their transfer agent.

Using the Direct Registration System (DRS) allows shareholders to hold the stock without necessarily using a broker. One of the benefits of this system is that it reduces the availability of stock for short sellers to borrow. Unlike brokers, transfer agents cannot lend shares.

In theory, if enough shareholders register their shares with the transfer agent, short sellers should have great difficulty in borrowing shares for shorting GameStop or covering their short positions in case of margin calls.

Most GameStop shares (an estimated 67% of GME's float) are held by retail investors.

Interestingly, since the practice of direct registration has been incorporated by GameStop shareholders, the company has been disclosing the number of shares registered quarterly in its Form 10-Q.

At the end of July, there were about 71.3 million shares registered through DRS. With another four months having passed since then, this number is now likely to be even higher.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• GameStop's management has been conducting a turnaround plan and has lately focused on profitability.

• GameStop's stock continues to be a favorite among retail investors and is strongly influenced by mobilized investing.

• The video game retailer's shareholders continue to directly register their shares to reduce the availability of stock for short sellers.

Read also: GME Stock’s Borrow Availability Is Too Low For Large Short Trades, Says This Expert

#1. GME's Management Is Focused on Short-Term Profitability and Aggressively Cutting Expenses

In the second half of 2022, the focus of GameStop's  (GME) - Get Free Report management has been clear:

to achieve short-term profitability and drastically cut costs.

Until a few months ago, management had been following a turnaround plan focused on strengthening the company's tech capabilities. The plan involved changing the company's entire board of directors and investing in e-commerce, crypto, NFTs, and web 3.0.

But as GameStop CEO Matt Furlong mentioned in late August, the company's focus is now different.

"After spending a year strengthening our assortment, infrastructure, and tech capabilities, we're now focused on achieving profitability, launching proprietary products, leveraging our brand in new ways, and investing in our stores," the CEO said.

This change in focus is due mainly to the drastic changes in interest rates and the impact this has had on capital allocation. As mentioned by GameStop Chairman Ryan Cohen, with the current high-interest rate scenario, the value of short-term cash flows is much higher than long-term cash flows.

"With GameStop, we are targeting higher returns and we are focused much more on short-term profitability," Cohen said.

To achieve short-term profitability, GameStop has been cutting expenses aggressively and should continue to do so, according to the company's chairman.

In July, GameStop made dramatic cuts to its staff — including the resignation of its former CFO, Mike Recupero. Between late 2021 and mid-2022, the video game retailer hired more than 600 employees.

In addition, GameStop announced a new compensation structure. It was decided that there would be no cash compensation paid to non-employee directors. Chairman Ryan Cohen and former CEO George Sherman ultimately declined to receive any compensation.

#2. The "Kardashian Economics" Are Still There

The term "Kardashian economics" was mentioned by S3 Partners Research Managing Partner Bob Sloan in the Netflix documentary Eat the Rich: The GameStop Saga.

According to Sloan, shorting stocks in a murkier macroeconomic scenario can be dangerous. That's because short sellers are underestimating the risk of squeezes. Events such as GameStop's January 2021 squeeze should no longer be viewed as once-in-a-lifetime rarities.

"The Kardashians are still here. Look at that chest and apply that to the financial market and tell me whether you believe that socially mobilized investing is going to disappear," said Sloan.

Even almost two years after the short squeeze event in January 2021, the popularity of GameStop on social networks and the internet as a whole remains super relevant.

On Google, the term GME is often among the most popular stock tickers (see below). And on Reddit, r/superstonk — a forum dedicated to exclusively covering GameStop stock — has more than 847,000 highly active users.

#3. The Direct Registration System Movement

It's evident that socially mobilized investing in GameStop remains super-strong when looking at the Direct Registration System (DRS). This system — by which shareholders directly register their shares with a transfer agent — has become incredibly popular among GameStop's retail investors.

Even though direct registration is less practical for selling shares than using a brokerage house, shareholders receive some clear benefits from this practice.

Through the Direct Registration System, shareholders can hold a stock without using a broker. The biggest benefit of this is that shares registered through the DRS cannot be lent to short sellers — unlike shares held through brokers.

This year, after the DRS movement began to take hold, GameStop started reporting the number of shares transferred directly with the transfer agent each quarter.

At the end of July, there were about 71.3 million shares registered through DRS. With another four months having passed since then, these numbers are now likely to be even higher.

Currently, it is estimated that almost 70% of GameStop's outstanding shares are owned by individual investors. This implies that about four out of every 10 retail investors have registered their shares through DRS.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Hedge fund manager Cliff Asness is one of the best-known AMC bears.

• Asness has an antagonistic relationship with AMC investors, recently calling them a "paranoid investing death cult."

• In 2022, AMC short sellers have been winning — but shorting the stock involves high borrow fees.

Read also: GME Stock’s Borrow Availability Is Too Low For Large Short Trades, Says This Expert

Who Is Cliff Asness?

Clifford Asness is the manager of hedge fund AQR Capital Management. This year, he revealed that he is shorting AMC Entertainment  (AMC) - Get Free Report.

Asness said that his bearish bet was due to AMC's valuation issues, as well as the movie theater chain's business fundamentals. 

"[AMC stock is] super expensive, super unprofitable, super high beta, and volatile," Asness said in June.

However, Asness has made statements about the risks of betting against a stock like AMC, which has broad support from retail investors. The hedge fund manager fired back at AMC shareholders (or Apes): 

"I dare all the meme-stock maniacs to try to hurt us."

Why Does Asness Keep Trolling the Apes?

Despite broad market turmoil, Cliff Asness' hedge fund has had a good year.

According to a Bloomberg report, the AQR Absolute Return strategy, which consists of a mix of quant trades, was up 38% through early November. That makes 2022 the best year for the fund since its launch more than 20 years ago.

In addition, AQR's equity fund is up 23%.

However, during a recent interview, Asness mentioned the antagonistic relationship he has with AMC Apes, calling them a "paranoid investing death cult."

"I leaned in too much, partly out of ignorance of how crazy that part of the world is," he said of his interactions with AMC's retail investors.

And in a tweet, Asness wrote that he bothers to argue with meme-stock investors because he is sure that one day they will thank him for it:

Also, the quantitative investor laid out his investment philosophy of seeking out cheap, steadily profitable stocks with upward momentum. Asness said that his factor-investing returns may be just beginning, because even after this year's positive returns, value stocks remain cheap.He expects this trend to continue for the next two-and-a-half years.

Based on his strategy that has been successful (at least for this year), the AQR hedge fund manager sent a message to the meme-stock investors: "There are a lot of investment strategies you should hold onto for dear life — if they're good long-term strategies.

"To my meme-stock friends, there's an acronym they use: HODL, Hold On For Dear Life. It's a great and important idea, but they use it wrong,"

Are AMC Shorts Winning in 2022?

Cliff Asness' hedge fund is one of many that are betting against (or have bet against) AMC. It's no news that the movie theater chain's stock has been popular among short sellers in recent years. In 2022 alone, the stock has dropped roughly 70%.

According to the latest data provided by S3 Partners Research, there is about $771 million in short interest in AMC. And through November 23, shorts have earned $1.73 billion in mark-to-market profits.

If history is any guide, it's risky to draw conclusions about the stamina of retail investors — especially meme-stock investors. Their resilience has been shocking the markets since early 2021.

Even if short sellers are winning the battle against AMC shareholders — so far — their gains may be short-lived, especially considering current stock borrow fee rates of nearly 45%.

Generally, when borrow fees are high — above 3% — short sellers are forced to close their positions. As a result, their remaining mark-to-market profits are burned.

Furthermore, by confirming that there is a lot of demand from short sellers, AMC's high borrowing fees put more pressure on short sellers to close out their positions and take as much profit as they can.

However, Cliff Asness himself doesn't seem to be too concerned about the cost of shorting AMC. He supports the thesis that stocks that are expensive to short have high valuations and little subsequent return.

Finally, there may still be significant catalysts for AMC stock to come. The most recent was after the third-quarter earnings results, when AMC stock surged over 50% in a few days.

Short-selling hedge funds may seem confident in their current positions, but a surprise rally in AMC's share price may indeed test their contrarian bets.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Video retailer GameStop  (GME) - Get Free Report has been a target of heavy short-selling; about 20% of its float - over $1 billion worth of shares - is currently held short.

• According to S3 Research analyst Ihor Dusaniwsky, current limitations on how many GameStop shares are available to borrow should prevent large short trades.

• One of the reasons behind share limitations is that many retail GameStop shareholders have been directly registering their shares via a transfer agent. About 30% of GME’s float has already been transferred through the Direct Registration System.

Read also: Carl Icahn Is Shorting GameStop Stock. Should Investors Worry?

Why There Are Limited GME Shares To Borrow

According to S3 Partners Research analyst Ihor Dusaniwsky, short sellers will have much less sway over GME’s price in the short term, thanks to the relatively small amount of GME shares available for shorting.

Dusaniwsky claims that short sellers do not have sufficient access to GameStop shares to apply notable downward pressure on the stock without significantly increasing their own borrowing costs.

"The vast majority of GME short selling has already been done, existing short sellers will be able to add some more exposure to their positions and new short sellers may enter the trade - but there is not enough stock borrow available to execute large short trades in the stock," said Dusaniwsky in a recent report.

Nearly 20% of GME’s float is currently held short. GameStop stock borrow fees, meanwhile, averaged out to about 8% (annualized) during the month of November.

Although 8% is not nearly as high as some of the GME borrow fees seen during 2021, it’s still well above the average borrow rate for shorting stocks (usually 0.3% - 3% annualized).

The GME Borrow Obsession

The heavy shorting of GME is due to widespread skepticism of the company from “smart money” institutional investors and hedge funds. These investors believe GameStop’s stock is trading at values completely detached from the company’s fundamentals.

To open up short positions against GME, however, these institutional investors must first borrow shares from other sources. As short activity increases, borrow fees - driven by supply and demand - also increase.

Due to high borrow fees, GameStop came to be the most profitable stock for securities lenders during the third quarter. Indeed, stock borrowers made a whopping $100 million by lending their GME shares to short sellers.

Based on data reported by DataLend, high borrow rates (rather than just high volume) played an important role in the profitability of GameStop lenders in the third quarter.

Directing Registration Reduces Share Availability

The most likely cause of GME shares’ low borrow availability is that retail shareholders have been directly registering their shares with a transfer agent.

Through a Direct Registration System (DRS) service, shareholders can hold stock without using a broker. One of the main benefits of this service is that shares registered via DRS cannot be lent to short sellers - unlike shares held with brokers.

Even though DRS is in many ways less practical than using a broker, many GameStop investors see a benefit to keeping their shares away from possible conflicts of interest between market makers and payment-per-order-flow brokers. DRS also provides protection in the event a broker-dealer goes bankrupt.

Currently, it is estimated that almost 70% of GameStop's shares are held by retail investors. In theory, if enough retail investors transfer their shares to a transfer agent, share availability will decrease. That would make it even more difficult for short sellers to cover their positions in the event of an upward spike in GME’s share price.

Notably, this year, GameStop started reporting the number of shares transferred directly with the transfer agent every quarter. By the end of July, there were about 71.3 million shares registered through DRS. With another four months having gone by since then, it’s likely that these numbers are now even higher.

Approximately 30% of GameStop’s 253.4-million-share float has been registered with a transfer agent. And since almost 70% of GME’s float is held by retail investors, we can extrapolate that about four out of every 10 retail investors have registered their shares through the DRS.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• According to a recent Bloomberg report, internal sources at Amazon say the company plans to invest $1 billion in theatrical film releases.

• As AMC's management pointed out during the company’s latest earnings report, film production is the single most important factor affecting the theater chain’s overall success.

• The Amazon news was positively received by AMC and other theater chain operators. Considering the volatile nature of, and high short interest in, AMC stock, we’ll be on the lookout for sharp upward moves in AMC.

Read also: Carl Icahn Is Shorting GameStop Stock. Should Investors Worry?

Amazon To Bet Big On Theatrical Film Releases

Tech behemoth Amazon  (AMZN) - Get Free Report is expected to invest about $1 billion a year in film production and releases, Bloomberg has reported. AMC Entertainment  (AMC) - Get Free Report shares traded up nearly 5% on the bullish news. Other publicly traded theater companies saw similar moves.

According to the Bloomberg report, Amazon will produce a small number of movies in 2023 as it builds experience within the film production and release niche. This marks the first time that a major streaming player has opted to make a big push toward in-theater releases.

Amazon's move into theatrical film releases, however, should not be seen as coming totally out of left field. Early this year, the company released two episodes of its Rings of Power series in theaters. And in 2017, the Amazon-produced rom-com “The Big Sick” was also released in theaters - to much audience and critical acclaim.

Amazon has also been investing in original content through its streaming unit, Prime Video. In 2021 alone, Amazon spent about $13 billion on video and music streaming services. In 2020, its investment was $11 billion.

In 2021, Amazon also purchased production giant MGM for $8.45 billion. That meant Amazon acquired MGM’s extensive film collection, bolstering its Prime offerings, but it also deepened Amazon’s bench of human capital and expertise within the production industry.

Amazon’s management, then, has made its intentions of delving deeper into the media industry clear. The company envisions an ecosystem that integrates Prime subscriptions with e-commerce and the company's other products.

With movie theaters regaining popularity as the Covid pandemic fades away, and with competitiveness within the streaming industry only accelerating, Amazon’s foray into theatrical releases offers it another potentially lucrative avenue to grow its media segment.

A Solution To Adam Aron's Biggest Concern

There are several challenges that the movie theater industry needs to overcome in the short term to return to pre-pandemic levels. But, as pointed out by AMC’s CEO Adam Aron, AMC’s business will be affected, first and foremost, by the number of popular movies released theatrically.

"At this point, there is only one topic that should be on the top of all minds and the tip of all tongues. It's not the coronavirus, it's not streaming, it's not windows. It is this: movie theater operators need more movies."

The Covid pandemic had a profound impact not only on the operation of movie theaters but also on film production, which experienced significant delays throughout 2020 and 2021. Major studios, for example, have dropped their production rates by 20% to 30% compared to pre-pandemic levels.

Although optimism is returning to the movie theater industry, progress is being made slowly. For the year 2023, a stronger box office is anticipated, with movie production rates finally returning to “normal” levels.

With the news that Amazon will be jumping into the production fray, many analysts are even more confident in their positive box office predictions for next year.

And according to AMC CEO Adam Aron, when demand normalizes, AMC will be very prepared. The company has been actively investing in infrastructure. It has worked on renovating its existing screens and increasing the number of IMAX, Dolby Cinema, Prime, and iSense screens in AMC theaters.

AMC Just Needs a Single Spark to Catch Fire

While Amazon's likely investment in theatrical releases is long-term bullish for the movie industry as a whole, AMC shareholders and traders may benefit from this news in the short term. That's because of the volatile nature of AMC stock.

The movie theater operator has been the target of massive short interest. Recent data indicated that about half a billion worth of AMC shares were being shorted - this comprises about 20% of AMC’s float.

Currently, high short-selling demand has been reflected in sky-high borrow fees for AMC shares.

AMC borrow rates reached over 100% in early November. This coincided with a 50% rally in AMC shares - the product of both positive earnings results and broad market euphoria amid weakening inflation.

The latest data shows that AMC borrows fees are still extremely high, at 38% annualized. That’s well over 10x the normal borrow rate for shorting stocks (generally between 0.3% and 3%, annualized).

Therefore, since the beginning of November, shorting AMC has become almost prohibitively expensive. The setup for a short squeeze is just about perfect. All that’s missing is a sharp upward movement driven by buying volume - which even a mild catalyst, such as the recent Amazon news, may trigger.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

Sam Bankman-Fried co-founded Alameda Research, a company that acts as a quantitative trading firm, in 2017. A few years later, Bankman-Fried decided to start a cryptocurrency exchange, FTX, in order to fund Alameda Research's initiatives.

In time, FTX became one of the world's top three crypto exchanges. However, the misuse of its customers' funds led to a serious crisis that has been compared to the notorious Enron scandal.

Here's what you need to know.

Why Is Sam Bankman-Fried in the News?

Bankman-Fried recently made headlines in the mainstream media recently after about $10 billion of his customers' money “disappeared.”

The Bahamas-based FTX, which had been the largest cryptocurrency exchange by volume and had more than 1 million users, filed for bankruptcy.

FTX was funded in large part by the assistance of celebrities such as Tom Brady and Stephen Curry. But now it has been accused of selling unregistered securities.

This deal, according to some legal experts, constituted a Ponzi scheme — an investment fraud that pays existing investors with funds collected from new investors.

However, the story behind the collapse is much deeper than a simple, potentially fraudulent scheme. The money Sam Bankman-Fried (SBF) raised was spread among several third parties along the way.

What Is SBF's Relationship With the Media?

The media previously glamorized SBF as a successfu, youngl entrepreneur.

Sam Bankman-Fried has been on the cover of Forbes magazine, and Fortune praised the FTX founder and even compared him to Warren Buffett.

The New York Times hosted him as a speaker at an event alongside Ukrainian President Volodymyr Zelensky and Meta (META) founder Mark Zuckerberg. And The Washington Post even wrote that the FTX collapse is undermining SBF's efforts to prevent a new pandemic.

One of Sam Bankman-Fried's strategies was to donate funds to non-profit media vehicle organizations to buy media loyalty. For example, about $3.25 million was donated to The Intercept, $5 million was given to ProPublica, an angel investment was made in Semafor, and an supposedly undisclosed amount was donated to Vox (the latter is not a non-profit organization).

What Else Did FTX Do With the Cash?

Sam Bankman-Fried also gave about $70 million in political donations, mostly to the Democrat Party — making SBF its second-largest donor. Another FTX executive, Ryan Salame, donated around $23 million, mainly to Republican and conservative groups.

Additionally, about $190 million was given to researchers and NGOs by the FTX Foundation. The Bankman-Fried family owns several foundations. Sam's mother, Barbara Fried, has a group that, before FTX existed, gave about $20 million to Democrat politicians.

FTX funded investigative research regarding COVID-19 treatments, just as SBF spent about $300 million on 19 properties in the Bahamas. SBF's parents, Stanford law professors, bought a $10 million house but have said they will return it.

FTX donated about $240,000 to a climate research center in the Bahamas, gave $50,000 to religious leader Lawrance Rolle, and donated $100,000 to a pet clinic.

Finally, through its affiliated trading arm Alameda Research, FTX made a loan to Sam Bankman-Fried himself for approximately $1 billion. In total, Bankman-Fried and three other FTX executives received $4.1 billion in loans.

What Will Happen Next to SBF?

There is an ongoing investigation regarding the Sam Bankman-Fried case. The investigation is being led by Maxine Waters, a Democrat who serves as U.S. Representative for California and is also chair of the House Financial Services Committee.

Waters told CNBC that everything possible will be done to uncover what happened.

"We will be a part of what is going on with these hearings and investigations, and we will do everything that we can to expose any violations that were made," Waters said.

Waters, however, has not commented on the donations that Bankman-Fried made to her fellow committee members.

Because Bankman-Fried donated to Democrats this year, he has close ties to politicians. Sam Bankman-Fried and his father even posed for a photo with Maxine Waters at the Democrat retreat in Philadelphia in March. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• According to Bloomberg, legendary investor Carl Icahn has held a short position in GME since early 2021.

• Although he's not a fan of short sellers, GME Chair Ryan Cohen has remarked that he admires Icahn's investing career, and it's likely that the two activist investors recently discussed GameStop.

• Icahn's short position on GME shouldn't have any practical effect for the stock's investors.

Read more: Why Ryan Cohen Invested In GameStop Stock

Is Carl Icahn Shorting GME?

According to a new Bloomberg report, legendary activist investor Carl Icahn is a GameStop  (GME) - Get Free Report bear.

In fact, he has been betting against the video game retailer since the short-squeeze event of January 2021, which kicked off the meme stock trend.

It's not public knowledge how large Icahn's short GME position is, but apparently, he started shorting GameStop when its stock was near its all-time high of $483 per share — before the 4-for-1 stock split.

Reportedly, Icahn has added to his short position over time. He has said he believes that GameStop shares are not trading according to the company's business fundamentals and are doomed to fall.

Although reports indicate that Icahn has other short positions on assets such as shopping centers, dealing in so-called "meme stocks" is not customary for the investor.

But as the HBO documentary Icahn: The Restless Billionaire revealed, he has been slowly handing over the reins of his investing empire to his son, Brett. And it's likely Brett could be behind some of Icahn's most recent investments.

What Is Ryan Cohen's Relationship With Carl Icahn?

Not so long ago, GameStop Chairman Ryan Cohen posted a photo taken of himself with Carl Icahn to his Twitter account.

This led retail investors who support GameStop's stock to speculate about what connection Icahn could have with the retailer's chair.

And Ryan Cohen himself made a joke along this theme in August: "Ryan Cohen by day, Warren Icahn by night."

Cohen's admiration for Carl Icahn's philosophy should come as no surprise. However, in his "Warren Icahn" tweet, perhaps Cohen was indicating that he also sees himself as a value investor who buys "cigar butt" companies with the potential for long-term gains.

In a recent interview with GMEdd.com, when asked about the picture with Carl Icahn, Cohen said that he did not want to expose publicly the content of his conversation with the investing legend. Cohen also said in the interview that he is not a fan of short sellers.

However, now that Icahn's short position in GameStop has been revealed, this may have been one of the topics of conversation between the two activist investors.

How Many GameStop Shorts Are There?

The truth is that GameStop has been heavily shorted for years. So the news about Icahn's GME short position should come as no surprise.

It's difficult to pinpoint exactly how many hedge funds and institutional investors hold short positions in GameStop. This is because, unlike investors who are "going long," shorts do not need to close out their positions.

The latest data provided by S3 Partners points out that $1.23 billion worth of GameStop shares are being shorted, which is about 20% of the company's total stock float.

According to S3 Partners Managing Partner Bob Sloan, short interest above $1 billion could fuel a new short squeeze. Short squeezes occur when a shorted stock's underlying share price suddenly ticks sharply higher, causing short sellers to scramble to cover their positions.

So even though it may sound a bit disappointing to GameStop shareholders Carl Ichan is shorting the company, the practical effect of his short position should have been already absorbed.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Ryan Cohen, GameStop chair and its largest share owner, gave an exclusive interview with GMEdd.com.

• Cohen discussed several GameStop-related topics, clarifying some issues that retail investors had been speculating about online.

• Since making his first investment in GameStop in late August 2020, Cohen's GME shares have already appreciated by about 1,800%.

Read more: Decoded: GameStop Chair Ryan Cohen's Cryptic Tweets

Who Is Ryan Cohen?

37-year-old Ryan Cohen is the former CEO of Chewy  (CHWY) - Get Free Report, the online pet retailer that he founded when he was just 25 years old. He eventually sold Chewy to PetSmart in a $3.3 billion deal and has since pursued other investment objectives.

As an investor, Cohen bet heavily on Apple  (AAPL) - Get Free Report and became the company's largest single investor, holding some 6 million split-adjusted shares.

However, Cohen became infamous when he became the largest individual shareholder of GameStop  (GME) - Get Free Report at the end of 2020. He initially acquired 10% of GME's shares but subsequently increased his ownership percentage to about 13% through his holding company, RC Ventures.

The timing of Cohen's GameStop investment couldn't have been better. His investments were made before the short-squeeze event in 2021, when GME shares jumped over 2,500% in a matter of a few days.

A little later in 2021, Cohen was appointed chairman of GameStop's board, strengthening his ties with the video game retailer beyond a simple investment.

Cohen rarely makes public appearances. He usually communicates with shareholders through mysterious and humorous Twitter posts — which tend to attract a lot of speculation.

Why Did Ryan Cohen Invest in GME?

After nearly two years of not making a single public appearance, Ryan Cohen recently gave an interview to GMEdd.com, a site dedicated to covering GameStop's stock for retail investors.

According to Cohen, the reason behind his few public appearances is that his time is mostly devoted to GameStop, where he has been working on a turnaround plan relentlessly for the past few years.

Cohen also said that he is always on the lookout for new investment opportunities and that he likes companies focused on consumer businesses, which is his core competency.

During the interview, when asked why he chose GameStop to invest in back, Cohen said that some of his reasons had to do with valuations and market skepticism:

"I invested in GameStop because I thought it was cheap and the intrinsic value of the business was worth more than the price that I paid. There was a tremendous amount of skepticism around GameStop and those are the things that I like... looking at things while no one is looking at them."

Cohen also said he is contrarian by nature, and that was a determining factor for his investment in GameStop at a time when investors were more interested in other assets.

"The opposite of that is IPOs, where the animal spirits are out and everyone is kind of standing in line trying to give them money. GameStop was on the opposite end of that. No one was interested in investing at the time I made the investment; it was hugely unpopular."

Cohen's Thoughts on Retail Investor Enthusiasm

According to Cohen, he became aware of the enthusiasm of retail investors and their activity in GameStop shortly after he filed his first Form 13D, a document that must be filed with the SEC within 10 days of purchasing more than 5% of the shares of a public company.

"I learned about it really when everyone else learned about it,” Cohen said.

When Ryan Cohen decided to join GameStop's board, he said he made a long-term commitment to the company. There was a lot of "board drama" at the time that had nothing to do with the volatility of the market, according to him.

Soon, Cohen decided to initiate a transformation process by changing the entire composition of the company's board of directors, and also replacing the entire management team. Thus, all his time was dedicated exclusively to those internal issues in the company and not necessarily to the volatility of GameStop shares.

Finally, when asked if any event similar to the January 2021 squeeze could ever occur again with GameStop's stock, Cohen said that he does not know but has hopes it can still happen:

 “Anything can happen in financial markets.”

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

Ryan Cohen has become one of the major characters in the GameStop  (GME) - Get Free Report story. The activist investor bought a large chunk of the company's shares in 2020 and watched them rise in value during the January 2021 "meme mania."

However, Cohen went further. His investment in the company has turned out to be a long-term commitment that got him to the position of chairman of GameStop's board. And Cohen has been leading a comprehensive turnaround plan for the company's business.

Read more: Citadel's Ken Griffin: Could the FTX Collapse Hurt the Financial Markets as a Whole?

Cohen's Cryptic Tweets

GameStop Chairman Ryan Cohen is the kind of executive who rarely makes public appearances. Instead, he often communicates with the company's shareholders through his Twitter account.

However, Cohen's tweets are often cryptic, leaving GameStop shareholders struggling to figure out their meanings and what they mean for the company. When asked, Cohen simply says, "My tweets are just me being me."

In a recent interview with GMEdd.com, Cohen revealed the meanings of some tweets that have puzzled GameStop's retail shareholders.

The McDonald's soft-serve cone

This is connected to Chewy’s  (CHWY) - Get Free Report — Cohen’s former company — first board meeting, which included a trip to McDonald’s  (MCD) - Get Free Report for soft serve.

 “That was before the super-high inflation," Cohen said. "[It was] $1.42 for 150-200 calories [of] ice cream. It [was] a good deal for a great treat.”

Ryan Cohen’s tombstone

“I have a very dark sense of humor, and I can be very self-deprecating at times.”

Sears being torn down

“That could be GameStop.” Cohen said, laughing. “I think that it has a lot of potential similarities.”

Toilet with a fax machine and a phone

“A very efficient setup by the way. And I do my best work at the toilet.”

David vs. Goliath

“That’s the kind of sentiment it sometimes feels about GameStop.”

Learning from Wikipedia

“I can’t believe the amount of money spent on college tuition when you can basically find and learn everything online.”

Short Sellers

“I’m not a fan of short sellers.”

Ryan Cohen mystery shopping

“When I go to [GameStop’s] stores, I am always ghost shopping.”

Wall Street vs. Main Street

“I don't know what the solution is. I don't understand all these management fees and why people give their money… whether in mutual funds, private equity, or venture capital. A lot of structures are set up with "heads I win and tails you lose." They make money regardless of whether they outperform the S&P 500.”

Executives' risk-free compensation

Cohen later replied by saying that “directors should comprise owners who bought shares with their own money.”

About this reply, Cohen said, “I think this is the simple and most effective solution. We’ve got a boardroom full of owners who are risking their capital. It is very very different when something is given to you as risk-free compensation and regardless the business does… you end up making money versus you bought shares with your own money and serve on a board.”

Cracking down on short sellers

“If you are long you have to disclose those positions, but if you are short, you don’t have to. It should be the same rules that apply to short sellers as people that have long positions… and ultimately that is what probably is going to happen.”

Expensive executives leaving a company in shambles

“Most of [executives'] compensation is risk-free and they don’t work very hard. They’re basically preparing PowerPoint presentations and doing conference calls. Corporate America is littered with risk-free compensation and overpaid executives.”

He also added, “It is deeply disturbing to see what is going on and the wealth inequality in this country.”

Cohen, Buffett, and Icahn

“I think that there is a lot to learn from Carl [Icahn]. He’s the [Original Gangster] activist and he’s been doing it for a long time. When it comes to investing, I learn a lot from my father and I kind of have an híbrid approach ready to go, activist, if the opportunity is right.

“But if I can sit on my hands and invest in a great business with a competent management team the way that Buffett does and let your capital compound for you. So I’m pretty agnostic in terms of what the approach is whether activism or passive investing.”

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Since reporting its Q3 earnings, AMC has been on a bullish streak; it’s also been helped by several broader market-related catalysts.

• Thanks to exceptionally high short interest in AMC, the stock’s recent rally has pushed cost-to-borrow rates into the stratosphere — increasing the chance that short sellers get squeezed.

• During October, AMC shares’ failures to deliver breached 1 million on several trading days.

Read more: Citadel's Ken Griffin: Could the FTX Collapse Hurt the Financial Markets as a Whole?

Taking a Look at Borrow Rates

Borrow rates or borrow fees refer to the fees charged by brokerage firms when they lend stocks to short sellers. The higher the rate, the more expensive it is to borrow a stock.

Borrow fees are heavily influenced by the supply and demand conditions of the market. If a stock is in high demand for short sellers, borrow fees inch upward. Borrow fees will also increase as the supply of available, “shortable” shares decreases.

Generally, borrow fees hover between a 0.3% and 3% annualized rate. Rates far exceeding 3% can be a warning signal; short sellers willing to take on heavier borrowing fees need to have even more conviction that a stock will fall precipitously.

AMC Stock Borrow Rates

AMC Entertainment  (AMC) - Get Free Report stock borrow rates have remained quite high in recent months. Clearly, the movie theater chain is still the target of high short interest. The latest data from S3 Partners attest that half a billion dollars worth of AMC shares is being shorted.

In Q3, AMC was one of the top five most profitable stocks for secured lenders in the U.S. Much stock lender profit was thanks to the high borrow fees charged to AMC short sellers. During

For the month of October, AMC had an eye-popping average borrow rate of 18%.

On November 8th, AMC reported an all-around beat on its Q3 earnings. Shares rallied more than 50% over the following few days.

Investors are also feeling bullish on Q4. Several potential blockbusters, including Black Panther: Wakanda Forever and Avatar 2, could generate significant revenue for the movie theater chain.

AMC’s rally was also bolstered by positive news in the broader market. A cooler-than-expected CPI report has led many investors to believe that inflation has finally peaked.

Strong buying pressure has pushed AMC borrow fees to sky-high levels. On some days in October, rates exceeded 100%.

Such extreme borrow rates are a signal that short demand is through the roof or that share supply is low - or both.

Shorting AMC, then, has become almost prohibitively expensive. The setup for a short squeeze is perfect.

Data from November 18th show that AMC borrow rates are sitting near the 60% mark. Though they’ve fallen from their 100% peak, those are still wildly high rates.

Finally, A Look at Failure to Deliver

Retail traders and shareholders following AMC should also be cognizant of the company’s failure to deliver data.

In trading, failure to deliver (FTDs) is when one party to a transaction fails to fulfill its obligations on the pre-agreed-to settlement date. On the buyer side of the trade, FTDs imply that there is a lack of money to proceed with the order. On the sell side, FTDs imply that sellers don't actually have assets to sell.

Below, you’ll see the data on AMC stock's failure to deliver during October. These data were provided by the US Securities and Exchange Commission (SEC).

As highlighted in red on the chart, during at least five trading sessions this month, AMC's FTD numbers exceeded 1 million. It should be noted that, if short sellers intend to deliver an asset once the delivery restrictions are removed, the SEC guarantees them a 35-calendar-day grace period following the settlement day.

Given that AMC's failure to deliver rate has remained above 1 million for several trading sessions in October, it should not be a surprise to see bumps in AMC’s share price throughout November and even early December as late deliveries are made.

These bumps will add to already high buying pressure, potentially triggering a parabolic short squeeze event.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Citadel CEO Ken Griffin has been a vocal critic of speculative assets such as meme stocks and crypto currencies.

• The fall of cryptocurrency exchange FTX reinforced Griffin's bearishness on the crypto industry and has raised concerns about investor confidence in the financial markets.

• Not long ago, Ken Griffin said that he saw the poor performance of crypto, NFTs and meme stocks as being healthy for the economy.

Griffin on the FTX Crash

Recently, the collapse of cryptocurrency broker FTX has raised many concerns about the crypto space.

Citadel's Ken Griffin, who is known for being a long-time crypto skeptic, was asked about the FTX debacle during an interview at the Bloomberg New Economy Forum in Singapore. He said that FTX "is one of these absolute travesties in the history of financial markets."

According to Griffin, the billions of dollars that traders have lost on crypto have affected the confidence of all the financial markets. This is the culmination of the decline in cryptocurrencies' values over the past two years, which Griffin said has had serious consequences for investors.

"This is terrible because the 20- to 40-year-olds who are so committed to crypto, they have to save for their retirement... They need to own stocks... They need to participate in our global capital markets," Ken Griffin siaid.

Ken Griffin’s Relationship With Crypto

However, earlier this year, Griffin stated that he was willing to start a new relationship with the crypto industry, admitting that he was wrong about his skepticism.

During a Bloomberg interview in March, the Citadel CEO said, "Crypto has been one of the big stories in finance over the last 15 years. And I'll be clear, I've been in the nayer camp over that period."

Even though he made it clear that he was still doubtful about the industry, he had also said that Citadel Securities would considering becoming a crypto market maker.

"It is fair to assume that in the coming months, you will see us engaged in making markets in cryptocurrencies," he said.

"To the extent that we are trying to help institutions and investors solve their portfolio allocation problems, we have to seriously consider being a market maker in crypto," Griffin added.

In June, CoinDesk reported that Citadel Securities was building a crypto trading marketplace, working in conjunction with Virtu Financial and other venture capital firms.

Why Griffin Thinks Speculative Assets Are Not Healthy for the Economy

Ken Griffin also has a negative opinion on meme stocks. A few months ago, he said that the declining performance of speculative assets like meme stocks, NFTs, and cryptocurrencies is healthy for the economy.

The Citadel CEO also blames the U.S. government's response to COVID as the cause of the speculative bubbles. Griffin said that, in many cases, the government continuing to hand out stimulus chekcs after the worst of the pandemic had passed encouraged retail investors to invest in assets like meme stocks.

Instead, Griffin believes the government should have earmarked that money for more productive uses.

"Billions of dollars going to companies that effectively go bankrupt, tens of billions, that's money that's not going to how to treat Alzheimer's or how to treat Parkinson's or how to educate our children. "

Citadel Securities found itself in the middle of a controversy with the GameStop  (GME) - Get Free Report short squeeze event in early 2021. The market maker was the driver of payment order flow (PFOF) through agreements with e-brokerages such as Robinhood  (HOOD) - Get Free Report.

Also, the Citadel hedge fund provided $2 billion to investment firm Melvin Capital, a major short seller that got burned during GameStop’s short squeeze in January 2021.

Ken Griffin has denied any accusations of misconduct related to the the event, and in November 2021, a U.S. District Court dismissed a class action lawsuit involving the company, ruling that there is no evidence that Robinhood and Citadel had colluded.

*Article updated on November 21.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• On November 8, AMC reported an all-around beat on Q3 earnings, and AMC shares rallied more than 50% in the following days.

• AMC is expecting an even better fourth quarter, with the release of blockbusters Black Panther: Wakanda Forever and Avatar 2.

• The latest AMC stock surge also stems from short sellers being forced to hedge their positions at very high borrow fees.

Read more: GameStop Stock: How Much Ownership Do Retail Investors Have?

A Better-Than-Expected Quarter

For the third quarter (Q3), AMC Entertainment  (AMC) - Get Free Report reported earnings per share (EPS) and revenue that beat Wall Street's estimates.

Revenue came in at $968 million, versus expectations of $961 million. And the company reported hosting more than 53 million moviegoers in the third quarter, which is a year-over-year increase of 33%.

However, the movie theater chain also reported wider net losses than in the same period last year. AMC had a loss per share of 20 cents, versus an expected loss of 24 cents.

AMC also reported that it has about $900 million of liquidity, which provides it with some strength to move toward its goals of both growth and financing its operations. It will also help keep AMC out of bankruptcy for the near term.

Although the quarter wasn't the best AMC has ever had — and it still failed to meet pre-pandemic levels — the company could have done worse, considering industry headwinds.

Recently, rival theater chain Cineworld filed for Chapter 11 bankruptcy protection. That made investors pessimistic about the industry as a whole, putting pressure on AMC's stock.

Because AMC was able to weather a difficult quarter suffering taking additional damage, its shares enjoyed a rally of more than 50% in the days following the earnings announcement.

Read more: Citadel’s Flagship Hedge Fund Is Up 30% This Year. Why Is Ken Griffin's Fund Doing Better Than Most?

Domestic Box-Office Bullishness Is Back

Another factor driving the strong reaction in AMC shares was the opening of Black Panther: Wakanda Forever. AMC enjoyed the fourth-largest weekend audience of 2022, with about 5 million moviegoers buying tickets at the company's movie theaters.

Also, early projections for Avatar: The Way of Water, which is expected to gross $650 million domestically, are impressive and hopeful for the fourth quarter.

Still, AMC CEO Adam Aron is being realistic. He has reiterated that, in the full fiscal year 2022, AMC will still see attendance a third below pre-pandemic levels. However, he expects that the moviegoers will return in full force by 2024 or 2025.

Lots of Buy-to-Covers

It's no news that AMC was able to survive the COVID-19 pandemic thanks to retail investors who came together to "squeeze" the short sellers who were betting on the company's downfall.

This "meme stock" mania caused a big spike in AMC's share price — enough so that the company was able to raise over $1 billion in cash by issuing more shares, which helped keep the company's liquidity in shape.

According to AMC's CEO, "If [retail investors] hadn't been there, we wouldn't be here today."

The truth is, even more than 18 months after meme investors "adopted" AMC, shares remain highly vulnerable to short squeezes. This is because there continues to be a lot of short sellers betting against the stock.

According to the most recent data, AMC's short interest stands at over half-a-billion dollars, and nearly 20% of its total float is being shorted.

AMC's popularity among short sellers is even more noticeable when you look at the borrow fees that are required to short the stock.

Driven by short interest supply and demand, during October, fees remained between 18%. After the third-quarter earnings release, AMC's borrow fee rates jumped to over 100%. At these levels, volatility in the stock is certainly due to buy-to-covers.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

An analysis of stock ownership is often an important part of performing due diligence (DD) on a publicly-traded company. Strategies adopted by a company's management team can be influenced by a key shareholder or group of shareholders. This influence, in turn, can impact future share price.

How Much of GME's Float Belongs To Retail?

Retail investors are believed to own about 67.5% of GameStop's  (GME) - Get Free Report float, according to Vickers Stock Research data. In their ownership breakdown chart (see below), that ownership is categorized as “others.”

GameStop's Chair Ryan Cohen himself owns about 12% of GME shares. These are held through Ryan’s holding company RC Ventures, which Vickers considers to be Institutional ownership.

Yahoo Finance, on the other hand, attributes about 15% of GameStop's ownership to all insiders, probably because they consider Cohen and his holding company to effectively be “insiders.”

The technical definition of “insider” is “a director, senior officer, entity, or individual who owns more than 10% of a publicly-traded company's voting shares.”

Since Ryan Cohen does not directly own GameStop shares, but rather owns shares through his holding company, some sources do not consider his ownership to constitute “insider” ownership. Thus, GME insider ownership corresponds to only 2% according to Vickers Stock Research.

This percentage divergence between sources is a mere technicality - but, for research purposes, it’s important to note the source of the discrepancy.

Vickers shows Blackrock and Vanguard as the top institutional holders of GME, with 7.8%, and 6.7% of the shares, respectively. However, the research firm reports 350 individual institutions holding GME shares.

Investment management company giants, such as Blackrock and Vanguard, own GME shares via their proprietary ETFs. These ETFs, in turn, end up mostly being owned by individual investors.

Institutional accounts pool assets from a limited number of clients who have millions or even billions of dollars to invest. Mutual funds, on the other hand, are primarily retail products that pool assets from a vast number of individuals who have limited funds to invest.

Among GameStop’s top mutual fund holders, the Vanguard Total Stock Market Index Fund and the iShares Core S&P Midcap ETF own 2.5% and 2.4%, respectively.

How Does This Ownership Breakdown Affect GME?

Even though a sizable chunk of GameStop is owned by institutions, it is clear that GameStop is largely owned by individual investors.

In many cases, when institutional ownership is dominant, a small group of large institutions turning against a stock can cause a selloff. Thus, one benefit of a retail-dominated ownership structure is that GameStop is not at the mercy of a few key institutional owners.

This is especially true in GME’s case, as one key institutional owner is RC Ventures (headed by GME Chair Ryan Cohen, who has little incentive to tank GME’s share price). Other major players BlackRock and Vanguard, meanwhile, own GME through passive, benchmark-tracking funds (e.g., ETFs tracking the entire S&P 500).

About 30% Of GME's Float Locked Through DRS

There’s another interesting facet to GME’s high retail ownership. This is the high level of direct registration of GME shares - a statistic heralded by the company itself and now included in quarterly reports.

The Direct Registration System (DRS) is a security registration service that provides shareholders with the option of holding their assets "on the books."

Thus, DRS can be a way for investors to hold their assets without needing a brokerage firm behind them. Through DRS, shareholders have more autonomy over their shares.

GameStop retail shareholders have seen DRS as an attractive move. When GME shares are held through DRS, they cannot fall into the hands of payment for order flow brokers. DRS also reduces the number of shares available to be loaned out to short sellers by brokerage firms.

In theory, the more GME shareholders use DRS to transfer their shares to GME’s transfer agent (Computershare, in this case), the fewer shares are available for short sellers. That impedes shorts’ ability to open new short positions and to cover currently open ones.

As reported in the latest Form 10-Q dated July 30, about 71.3 million GameStop shares were registered with Computershare. This corresponds to 30% of GME’s float.

Considering that 67% of GME's float is in the hands of individual investors, this implies that nearly half of all retail-owned shares have been registered with a transfer agent.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

Famed investor Cathie Wood’s ARK Innovation ETF  (ARKK) - Get Free Report is finally showing signs of having a pulse. The high-growth strategy has had a terrible 2022 so far, down a whopping 58% since the start of the year. But the tides could be shifting, as ARKK has climbed 22% in the past four trading days alone.

Below, I explain why now is the time to buy ARKK and maybe ride the 290% rebound that would take the ETF back to all-time highs. Investors, however, should keep a couple of things in mind: (1) pay attention to price action and (2) know when to exit the trade.

(Read more from Wall Street Memes: Citadel’s Flagship Hedge Fund Is Up 30% This Year. Why Is Ken Griffin's Fund Doing Better Than Most?)

ARK Innovation: follow the trend

I have published about ARKK a few times in the past. To me, profiting from this ETF that has had intense ups and downs since its inception is much more a matter of following price trends than about company or sector fundamentals.

To be clear, any investor considering ARKK should fundamentally subscribe to Cathie Wood’s idea that high-impact, disruptive innovation probably offers the best potential returns over the long term, with valuation being all but a second thought. Die-hard disciples of Warren Buffett could stop reading right here.

If this minimum requirement is met, then I think that the next step is to ride the trend.

Unlike other investment strategies, ARKK’s approach can be very speculative and subject to bubble-like behavior: fast and sizable climbs to the stratosphere (think 2014-2020), followed by painful crashes (think 2021-present).

Simply holding ARKK when the previous day’s price was higher than the 50-day average price (but selling it whenever the ETF price dipped below the average) would have been a very profitable strategy over the past five years. See the chart below, which depicts:

• 50-day moving average strategy (since January 2018): total returns of 87%, maximum drop from a peak of 39%.
• Simple buy and hold (since January 2018): total returns of only 2%, maximum drop from a peak of 79%.

Of course, simply “trading the trend” would not have guaranteed a profit this year. Notice the orange line in the graph above: the strategy would have still lost money so far in 2022, 22% to be precise.

If trading ARKK, keep this in mind

For the first time since September 2022, ARKK price climbed enough to top its 50-day moving average on Thursday, November 11. If following the trend to a tee, which this strategy requires them to, traders should be invested in ARK Innovation right now. The ETF ended the Monday session worth nearly $40 per share vs. the $38.58 moving average.

But how do we know that this time ARKK will finally take off? Well, we don’t know it at all. This is why stepping out of the way before the ETF crashes again (if it happens) is a crucial part of the 50-day average approach.

I understand that fundamentalists (i.e., investors that use fundamentals to base their decisions) don’t usually appreciate the simplicity of just watching price action. To that, I would say that I am finally feeling a bit more optimistic about high-growth stocks once again. This is the first time in at least one year that the market has witnessed signs of cooling inflation and, possibly, less aggressive monetary tightening ahead.

But in the case of ARKK, I don’t even bother to look any deeper into ARKK’s top holdings, the prospects for growth stocks in 2023, or the state of the economy.

If ARKK ever returns to all-time highs of nearly $160 apiece, the upside opportunity of 290% is highly compelling. To partake in this recovery story, own the ETF at the right times and sell at the first sign of trouble to prevent large losses, only to repeat the process as many times as necessary to (hopefully) reap the benefits in the end.

Ask Twitter

ARK Innovation has finally shown signs of life, as the ETF price has finally climbed above its 50-day moving average for the first time since September 2022. Is this recovery the real deal?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Since May, trading volume in GameStop's stock has been declining in each consecutive month.

• Many retail investors are registering their GME shares through the Direct Registration Service, which has an impact on the stock's liquidity.

• Despite its lower liquidity, GameStop continues to be a popular target for short sellers and a money-maker for stock lenders.

GME's Monthly Trading Volume Declining

Looking at GameStop's  (GME) - Get Free Report trading volume data for 2022, we can clearly see a decline in trading activity since May. See below:

GameStop's liquidity peak occurred in March, when news of its 4:1 stock split broke. That also coincided with a rally in the S&P 500. From mid to late March, the video game retailer's shares shot up 140%.

Because GameStop is a popular target for short sellers — the latest update showed about $1.5 billion betting against its stock — increased buying activity tends to pressure short sellers to close their positions and buy the stock to cover their margins. This triggers noticeable upward movements in the stock.

Despite some fairly severe price swings this year, GameStop's trading volume has fallen more than sixfold, from 636.57 million shares traded in March to 102.97 million shares traded in October.

The most likely cause of this liquidity decline is broader market forces. Thanks to rising interest rates, many investors are avoiding stocks — especially those that trade less on fundamentals and more on growth or speculation.

Is DRS Behind the Liquidity Decrease?

There's another factor that has impacted the liquidity of GameStop shares. It is at the very least unusual, but not bearish at all.

GameStop shareholders are actively utilizing the Direct Registration System (DRS) service, which provides shareholders with the ability to electronically move insured shares in a book-entry form between the share issuer and the investor's broker-dealer.

In other words: with this service, GameStop investors have found a way to lock up their shares without the need to have a brokerage house behind them.

Even though it is less practical to sell your shares this way than through a broker, there are logical benefits to registering your shares through DRS.

For example, investors can keep their shares away from possible conflicts of interest between market makers and payment-per-order-flow brokers, as well as to protect themselves in case the broker-dealer goes bankrupt.

However, the main benefit may be to limit the ability of brokerages to lend shares to short sellers — which is a common practice.

In theory, if enough retail investors use DRS to transfer their shares to a transfer agent, share availability will decrease. Thus, it will become difficult for short sellers to cover their positions in an eventual squeeze.

Interestingly, GameStop has started to disclose the number of shares transferred directly with its transfer agent on a quarterly basis. And the numbers are alarming.

According to data from July 30, as stated in GameStop's latest Form 10-Q, about 71.3 million shares are registered directly through the DRS. That number could be even higher by now.

This amount corresponds to about 30% of GameStop's total float, which implies that, in theory, these shares are not liquid enough to be traded daily. This can be confirmed by looking at the trading volume trend of GME in the last few months.

We can speculate that, when GameStop reports its fourth-quarter earnings results, the first number that shareholders will probably look at will be the number of shares transferred through its transfer agent.

How GameStop Lenders Made Money in Q3

It's not news that GameStop is one of the most popular stocks for short sellers to bet against — thanks mainly to its meme-stock valuation.

With the markets in turmoil, many institutional investors have been targeting stocks whose valuations are detached from their fundamentals. Of course, GameStop is one of them.

The latest GameStop short interest data from mid-October indicated that 20% of GME's float — 53.88 million shares — was being sold short.

During October, GameStop's borrow fee rates remained at an average of 9%. Even though these fees are lower than earlier this year, they're still high. This puts extra pressure on short sellers to cover their positions in case of an upward stock movement.

Despite the efforts of GameStop shareholders to limit stock lending to short sellers, GameStop was the most profitable equity in the North American lender market, generating more than $100 million in revenue for lenders. A large part of these profits came from GameStop's high borrow fees.

• DWAC stock recently soared on the possibility of former President Trump running for another term in 2024.

• DWAC has repeatedly postponed a crucial shareholder vote that give its planned merger with Trump Media and Technology Group a one-year extension.

• DWAC needs the vote of 65% of its shareholders to postpone the merger again and to prevent the SPAC from being liquidated.

The Hyped-up Trump SPAC

Digital World Acquisition Corp.  (DWAC)  is a special purpose acquisition company (SPAC). DWAC's main goal is to merge with Trump Media and Technology Group (TMTG), thus taking it public.

Should the merger go according to plan, all DWAC investors will become shareholders of TMTG. The Trump company's two main business segments are an existing social network, Truth Social, and a planned streaming service, TMTG+.

However, since the SPAC's launch, DWAC has become a meme stock, trading more on speculation than on its actual intrinsic value. In fact, some could say that there is pretty much zero value to DWAC, because its TMTG merger has been repeatedly postponed.

Shares of DWAC jumped 800% in October 2021 but have since lost more than 76%.

Mark Your Calendars for November 15

Over the past year, DWAC has been trading on news linked to Donald Trump. Recently, DWAC shares shot up over 70% on the possibility of a new run for the White House by the former president.

The latest news is that Trump will make a big announcement on November 15 at his Mar-a-Lago resort. It's widely expected that Trump will use that day to launch another presidential campaign.

Considering DWAC's speculative history, it's likely the SPAC's shares will be very volatile until Trump's "big announcement." For investors or traders willing to capitalize on risk — as well as the Trump name — this could be a good opportunity.

But there's another news item that recently impacted DWAC shares: Elon Musk's purchase of Twitter   (TWTR) - Get Free Report. Following the takeover, shares of DWAC rose nearly 15% in a single trading session.

The Tesla   (TSLA) - Get Free Report CEO has already made significant changes to the company's structure. This has had a positive impact on DWAC shares — even though Twitter's "free speech" focus make it more popular among right-wing social media users than Truth Social.

Musk has already signaled the re-inclusion of banned Twitter users, including Donald Trump. However, the former president said he doesn't plan to return to Twitter. He said:

"I am staying on Truth. I like it better, I like the way it works. I like Elon, but I'm staying on Truth."

Is DWAC Destined for Liquidation?

DWAC has repeatedly postponed the deadline for its merger with TMTG — four times, to be exact.

Unless 65% of shareholders vote to extend the merger again, the SPAC could liquidate. In that case, all initial public offering (IPO) proceeds would be returned to public shareholders.

In September, the SPAC failed to acquire the necessary shareholder support to extend the merger deadline for another year. Since then, the extension vote has been postponed monthly — most recently at the November 3 meeting.

At this meeting, DWAC CEO Patrick Orlando adjourned the shareholder meeting until November 22, giving stockholders additional time to cast their votes.

It's worth noting that both DWAC and Trump Media are under federal investigation for possible securities violations. Trump himself is in hot water thanks to a high-profile Department of Justice investigation into improperly stored classified documents.

However, as Trump signaled, even if the merger doesn't happen, TMTG will move forward. "If they don't come with the financing, I'll have it private," Trump said. "Easy to have it private."

• Movie theater chain AMC reported Q3 results that beat expectations for both loss per share and revenue.

• Even though AMC reported a slightly wider net loss compared to the same period last year, the company has made significant progress.

• Responding to questions from AMC shareholders during the earnings call, CEO Adam Aron addressed some widely discussed issues among retail investors.

AMC's Q3: Industry-Related Headwinds, but a Recovery Is Underway

On November 8, AMC Entertainment (AMC) reported third quarter (Q3) earnings results that beat both top- and bottom-line estimates.

The company reported a loss per share of 20 cents, versus an estimated loss of 24 cents. On the revenue front, AMC reported $968 million, versus the $961 million expected by analysts.

Also, AMC counted more than 53 million moviegoers in Q3, implying 33% year-over-year growth. However, attendance levels are still below pre-pandemic levels.

To be clear, the financial results were far from perfect. AMC reported that it lost money in Q3 compared to the same period last year. Net losses grew by $226.9 million, versus a net loss of $224.2 million in Q3 2021.

The movie theater chain already anticipated a difficult third quarter, marked by relevant headwinds in the movie industry such a weak lineup of new films.

In addition, high inflation and rising interest rates didn't help AMC in Q3, either.

Nevertheless, AMC reported that it has about $900 million of liquidity, which provides it with some strength to move forward toward its goals of both growth and financing its operations. CEO Adam Aron said:

"Beyond our ongoing operating recovery, AMC has been strengthened by our recent capital markets activities, notably debt reduction, debt refinancing, and equity capital raising."

AMC management also noted that it has paid down about $144 million of its $400 million in loans. AMC also raised roughly $37 million in equity from its preferred shares, the APE units.

For Q4, management's expectations are more optimistic.

The release of Black Adam in mid-October gave a hint that better numbers are to come. And Black Panther: Wakanda Forever is expected to be the second-biggest movie of the year in terms of ticket sales — behind only Top Gun: Maverick.

For the full fiscal year, AMC pointed out that the domestic box office should register 75% growth compared to last year, which was affected by the pandemic. For the following years, Aron predicts that the "box office should grow yet again by between 15% and 25% and possibly by even more."

AMC's Next Steps

Looking ahead, in the first half of 2023, AMC will launch its brand of microwave popcorn, AMC Perfectly Popcorn, in partnership with a major national retailer. The initiative is expected to bring in incremental food and beverage revenues as AMC enters the multibillion-dollar popcorn market.

The other initiative recently announced by AMC is a partnership with Zoom Video (ZM). AMC has plans to move further into the meeting and corporate events market. AMC will link its theaters for nationwide meetings using a new product called Zoom Rooms at AMC, which should be available by 2023.

AMC currently generates $20 million in business meetings limited to just one business at a time. With the Zoom partnership, AMC will be able to make money from multiple markets simultaneously.

Why Is AMC's Stock Sinking?

After the Q3 earnings announcement, the market didn't react favorably. AMC shares plummeted 8% in the trading session the next day. APEs fell nearly 20%.

During the earnings call, when asked by an AMC shareholder why the stock is sinking this year, CEO Aron attributed it to macroeconomic forces.

Besides inflation, which is forcing the Fed to raise interest rates, the war in Ukraine is causing global instability and increasing energy costs.

As for the movie theater industry as a whole, Aron pointed out that some of AMC's rivals are in jeopardy — such as Cineworld, which has filed for Chapter 11 bankruptcy protection.

This has made investors more pessimistic about the industry.

A Word on DRS

Finally, a topic that is often discussed among AMC investors on social media platforms is the Direct Registration System (DRS). This service offers shareholders the option of not holding the stock through a brokerage.

Responding to a question from an AMC shareholder regarding DRS, CEO Adam Aron made it clear that he thinks the primary benefit of registering shares directly with a transfer agent is the fact that transfer agents do not short shares, unlike many brokerage firms.

Fellow meme-stock GameStop's (GME) shareholders have been actively adopting this practice. The video game retailer has about 30% of its total float registered directly with its transfer agent.

However, AMC's CEO made it clear that shareholders are making this move at their own risk, and that there is no guidance from AMC telling shareholders to do so.

According to Aron, there are a few thousand AMC shareholders who have already directly registered their shares. He said:

"As best I can tell, it's around 15,000 or so of our millions of shareholders who decided to directly register shares. I think they've registered in the neighborhood of 10 million shares or APEs with our registrar."

According to AMC's Form 10-Q, as of September 30, there were 4.9 million AMC shares and 4.7 million APE units directly registered with the transfer agent, which is less than 1% of AMC's float.

• Jim Cramer, host of CNBC's Mad Money, said on a recent show that it's time to buy shares of cannabis stock Tilray.

• Tilray has been making a series of strategic acquisitions, especially in the liquor space, to profit while waiting for the U.S. legal cannabis market to expand.

• On the potential verge of the legalization of cannabis for adult use in the U.S., now is a good time to invest in Tilray shares.

(Read more from Wall Street Memes: How GameStop Stock May Do In The Face of Another Fed Rate Hike)

Jim Cramer: Tilray’s Time Has Come

Mad Money's Jim Cramer recommended buying Tilray  (TLRY) - Get Free Report shares during a Lightning Round segment (in which he provides quick answers to stock-related questions).

"Their time has come... I say, buy Tilray," Cramer said.

This isn't the first time the CNBC host has mentioned the cannabis company on his show. Last month, Cramer said that he was considering whether it would be worth owning TLRY during Joe Biden's presidency.

Recently, President Biden pardoned thousands of people who had been convicted of marijuana posession in federal courts. This caused cannabis stocks in general to rise. Tilray shot up 30% on the news.

But then Tilray reported fiscal first-quarter earnings results that failed to meet market expectations.

The company missed estimated losses per share by 1 cent. And revenue fell nearly 9% year over year. Wall Street had expected a drop of only 6%.

After these not-so-bullish results, Tilray's stock tumbled about 25%.

However, it's worth pointing out that the stock's drop wasn't related exclusively to Tilray's earnings results. The broader cannabis market experienced a sell-off as well.

Tilray Grows While Waiting for Legalization

Tilray is one of the leading cannabis companies active today. The company is the market leader in its home country of Canada and in some European countries where cannabis use has already been legalized.

But Tilray's goal is clearly the untapped U.S. cannabis market.

Recently, one of Tilray's major moves was the partial acquisition of MedMen, a company that has a high penetration in the retail cannabis market in the U.S. According to Tilray's CEO, Irwin Simon, MedMen will be key for Tilray to become the market leader in the U.S. when legalization occurs.

The company also owns well-positioned brands in the U.S. such as SweetWater Brewing Co., Breckenridge Distillery, and Manitoba Harvest.

As Tilray seeks to diversify its portfolio, especially while we await legalization in the U.S., the company has been investing in the liquor business.

Tilray's latest investment was the acquisition of Montauk Brewing Co. to add to its product portfolio. The company is labeled as the number one craft brewer in Metro New York. According to Tilray, the acquisition is expected to be "accretive to the company's adjusted [earnings before interest, taxes, depreciation, and amortization]."

Simon said the acquisition is part of Tilray's strategy to strengthen its footprint in the U.S. market by leveraging its portfolio of fast-moving consumer goods brands.

"This distribution network is part of Tilray's strategy to leverage our growing portfolio of U.S. CPG brands and ultimately to launch THC-based product adjacencies upon federal legalization in the U.S.," the CEO said.

Should You Follow Cramer's Advice?

Cramer's recommendation on Tilray makes sense, especially considering recent events regarding the cannabis industry.

The main catalyst for Tilray — as well as cannabis stocks in general — is federal legalization. With Democratic control in the Senate, hopes that legalization would finally take place have been high since last year.

President Biden's move to pardon pot offenders, while a small step for the cannabis industry, showed that cannabis-related agendas are actively being debated at the federal level.

The odds of legalization have never been as high as they are today.

Should legalization occur in the near term, Tilray will most probably be one of the main players in the industry, given its leadership in Canada and Europe, as well as its gradual penetration in the American market through its portfolio of consumer packaged goods.

However, even with legalization taking longer than assumed, recent news has brought hope to the cannabis industry.

Rival Canopy Growth  (CGC) - Get Free Report recently announced that it is speeding up entry into the U.S. marijuana market with a new holding company, Canopy USA. Speculation that other cannabis companies might follow could buoy Tilray's stock.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• October was another month of gains for Citadel's flagship hedge fund, rising 1.5%.

• Ken Griffin's fund has been outperforming peers such as Millennium and Balyasny.

• Ken Griffin and Citadel Securities found themselves embroiled in a payment-for-order-flow issue during the GameStop short squeeze of early 2021. 

• Recently, Citadel's CEO criticized the effect of speculative assets, such as meme stocks and crypto, on the overall economy.

Ken Griffin's Citadel Is Having a Great 2022

Citadel's flagship hedge fund has seen outstanding returns this year. In October alone, the fund was up 1.5%. And in September, the fund had reported 2.5% growth.

A contributor to the hedge fund's solid performance this past month was the rebound of the S&P 500, which closed up 8% in October. However, the index has still accumulated losses of more than 20% YTD.

The Citadel Wellington fund’s positive October performance, meanwhile, pushed it to a 30.7% YTD gain.

Citadel also saw solid gains across its global fixed income, tactical trading, and equities funds.

• Its Global Fixed Income fund returned 1.4% in October, accumulating a YTD performance of +25.8%.

• Its Tactical Trading fund saw returns of 0.2% in October, accumulating a YTD performance of +21.5%.

• And finally, Citadel Equities rose 0.6% in October, bringing its YTD 2022 performance to +17.4%.

Peer funds such as Millennium and Balyasny have delivered YTD gains of 10% and 7.8%, respectively. While solidly outperforming the general market, these funds are getting walloped by Citadel’s flagship fund.

Why Is Ken Griffin's Fund Doing Better Than Most?

A few weeks ago, Ken Griffin gave an interview with CNBC during the CNBC Delivering Alpha conference. He was asked what the key to Citadel's success this year had been.

Griffin said that his mindset in running a large asset management firm such as Citadel required a very sharp trading posture. The upshot, in Griffin’s case, is a fluid portfolio with very active trading in the foreign exchange market, 10-year bond, and commodities.

"You can come in to work one day, find that you're long on a bunch of 10-year bonds; two weeks later, you're short a bunch of 10-year bonds." Griffin said.

However, according to Citadel's CEO, the key differentiator that has provided Citadel with a competitive advantage is the collaboration and communication power of his team, who are all working out of the same physical office.

Griffin points out that many of his competitors work remotely and find it more difficult to quickly assimilate macroeconomic news and company earnings reports.

Griffin As A Critic Of Speculative Assets

Ken Griffin recently spoke on speculative assets, specifically honing on the meme stock craze and the rise of NFTs (non-fungible tokens) and cryptocurrencies.

Griffin sees the declining performance of these speculative assets this year as a healthy trend for the economy. He blames several related speculative bubbles on the US government's response to COVID.

A critic of government stimulus given after the worst of Covid had passed, Griffin said that, in many cases, stimulus checks ended up in speculative assets like NFTs, cryptocurrencies, and meme stocks.

"Billions of dollars going to companies that are effectively going to go bankrupt, tens of billions, is money that's not going to how to treat Alzheimer's or how to treat Parkinson's or how to educate our children. "

It is worth noting that Citadel Securities' role in the GameStop  (GME) - Get Free Report short squeeze event has been a point of controversy. Citadel’s involvement, in fact, was a driver of payment for order flow (PFOF) coming under scrutiny at the federal level.

Ken Griffin's Citadel Securities is one of the largest market makers in the world and has PFOF agreements with some electronic brokerages.

And in early 2021, Citadel found itself embroiled in a PFOF issue involving Robinhood. The topic was and remains highly debated among retail investors.

Ken Griffin has denied any misconduct in the event, and in November 2021, a U.S. District Court dismissed a class action suit involving the companies, ruling that there is no evidence that Robinhood  (HOOD) - Get Free Report and Citadel had colluded.

During a recent interview with CNBC, Griffin was asked about the issue. He claimed that he was aware that there is or was a significant chance that the order flow payment would be prohibited and that if it was, he would adapt.

The Citadel Securities founder also said that PFOF has allowed large electronic brokerage firms to not charge commission fees, which many retail investors appreciate. If PFOF were to be banned, it would likely result in higher commissions being charged - something SEC Chairman Gary Gensler and the electronic brokerage community should take notice of.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• As the markets had anticipated, the Fed made another big interest rate hike - 75 bps this time - and indicated that it will eventually need to raise interest rates above 4.6%.

• GameStop, and the broader markets, took the news badly, making significant declines right after the Fed's announcement.

• Because it has almost no debt and is sitting on a sizable cash pile, GameStop may be much less impacted than other, more highly-leveraged companies.

Read more from Wall Street Memes: GameStop Stock: Outperforming the Tech Giants in 2022

Another Widely-Expected Interest Rates Hike

The Federal Reserve made another large rate increase at its last meeting on November 2nd. In a highly anticipated move, the Fed raised rates by 75 bp, moving the federal funds rate to the 3.75%-4% range. This is the highest level it has been at since January 2008. And it follows the most aggressive monetary policy the Fed has had since the 1980s.

While Fed Chair Jerome Powell hinted at potentially slowing the rate hike pace in the future, he also made clear that the Fed still has a long way to go.

"It is very premature, in my view, to think about or be talking about pausing our rate hikes," Powell stressed. "We have a ways to go. Our policy, we need ongoing rate hikes to get to that level of sufficiently restrictive [territory] - and of course, we don't know exactly where that is. ... I would expect us to continue to update it based on what we're seeing with incoming data."

Perhaps the least encouraging news came from the Central Bank’s projection that interest rates will now need to move above 4.6%. Previously, 4.6% was seen as the leveling-off point for rates.

While news out of the Fed meeting was not particularly surprising, the markets were not pleased. The Dow Jones Industrial Average, S&P 500, and the Nasdaq ended the November 2nd trading session down 1.6%, 2.5%, and 3.4% respectively.

What about GameStop?

The broad market took a big hit with the announcement of the interest rate hike, and GameStop  (GME) - Get Free Report was no outlier. Shares of GME plummeted 6% after the Fed announcement.

According to the Fed, there is still little clarity concerning how long high-interest rates will have to stick around. What is known is that the longer interest rates remain high, the more leveraged companies – i.e., those with debts larger than the average for their industry – will have to deal with the pinch of high-interest rates.

Debt expenses will gradually squeeze the operating margins of these companies, and many may be forced to run their businesses “hand-to-mouth”.

The good news for GameStop investors is that the video game retailer currently sits in a robust cash position - about $909 million. This amount is $570 million more than the company had during the worst trough of the pandemic.

The company's considerable cash hoard will offer it some extra cushion should macroeconomic conditions sour further.

However, it is necessary to point out that most of this amount did not come exclusively from the company's operations. Rather, the bulk of it came from $1.67 billion issued in equity last year, when the board took advantage of GME’s extremely elevated share price.

Even though the cash raised did generate float dilution, GameStop's management was able to use that cash to clear almost all of its debt.

GameStop's operations, importantly, are still not profitable. The company has reported operating losses greater than $100 million in each of the last four quarters. GameStop has plans to put its capital to work on its turnaround plan, led by Chair Ryan Cohen and CEO Matt Furlong, which is aimed at transforming the company into a digital-focused business.

Not All That Glitters Is Gold

A sizable cash hoard does not necessarily mean that GameStop is in a situation of privilege or comfort.

GameStop's operational difficulties are a worrying factor for the long term. Even though in the last quarter, Q3, the company reduced income loss by $50 million, there is still no clarity on when profitability will return for the video game retailer. GameStop had to use about $380 million in cash to support operations last quarter.

GameStop's Q3 operating cash was negative $103 million. In the last twelve trailing months, the company recorded negative $811 million in operating cash flow, indicating expenses are far outstripping inflows.

This rate of spending is simply unsustainable for GameStop. If it stays on the same course, its entire cash pile will dry up in a matter of time.

The good news is that GameStop's management is prioritizing this very issue. Executives are mobilizing with the primary objective of returning to profitability, as CEO Matt Furlong's recent speech attests:

"After spending a year strengthening our assortment, infrastructure, and tech capabilities, we're now focused on achieving profitability, launching proprietary products, leveraging our brand in new ways, and investing in our stores."

Even though GameStop's stock trading performance is heavily influenced by socially- mobilized investing, sooner or later the stock's performance will more closely track earnings growth. In the short term, business fundamentals may matter less. But in the long term, the market’s focus will likely be on GME’s return to its shareholders.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• GameStop's stock has fallen only 30% in 2022, while the tech-heavy Nasdaq has lost more than 33%.

• Because GameStop hasn't always followed the direction of the broader market in recent years, it has served as a hedge.

• The so-called "smart money" has become increasingly skeptical of the value investing model and has started paying attention to meme stocks like GME.

Read more from Wall Street Memes: SIRI, LCID, and GME: 3 Stocks With Short Squeeze Potential for November

How Has GME Outperformed the Tech Sector?

Despite an unfavorable macroeconomic backdrop, GameStop's  (GME) - Get Free Report stock has been faring better than many tech stocks. GME's year-to-date drop of "only" 30% has been more subtle than the 33% drop in the Invesco QQQ ETF, which is heavily weighted toward large-cap technology companies.

GameStop's performance compared to large-cap tech companies is due in part to the fact that GameStop trades on the sentiment of its shareholders, rather than exclusively on the fundamentals of its business.

Excluding Big Tech names like Apple  (AAPL) - Get Free Report and Twitter  (TWTR) - Get Free Report, whose performances have outperformed GameStop so far this year, the vast majority of other tech companies have lost far more than the video game retailer.

See the tweet below from the founder and CEO of Compound Capital Advisors, listing the returns of several large-cap and GME stocks this year on November 2:

Is GameStop a Market Hedge?

It shouldn't come as much of a surprise that GME has held up better against the dreary market. Over the past five years, the stock has had a negative beta. Specifically, GME has reported a beta of -0.29 in the most recent five-year period.

A negative beta is relatively rare among "traditional" stocks. It implies that an asset trades at a negative correlation to the broader market.

However, it's worth noting that the reason why GameStop's beta has been negative is because the stock shot up by more than 2,500% in early 2021.

For most of this year, GME has traded at a positive beta. GME's beta with the S&P 500 has averaged out to 2.0 year to date. That means, on average, GME is trading with, not against, market trends.

At a couple of points during January and July, however, GME went on a negative beta tear, dramatically bucking the market's movement (see chart below).

What the "Smart Money" Keeps Missing About GME

A few weeks ago, famed hedge fund manager David Einhorn drew attention when he declared that value investing may never come back. According to Einhord, given the way stocks have been performing this year, the market has adopted alternatives for calculating equity value.

According to Bloomberg data, in recent years, most industry groups have seen bankruptcy filings decline from mid-2020 pandemic highs. Thus, companies considered "zombies" remain alive with interest rates still at fairly low levels.

This has an impact on investors who remain comfortable betting on growth, especially after the Fed's financial policies have made the market less analytical.

It's clear that markets are evolving, and investors need to look for other types of strategies — not only on the short side but also on the long side, based on current market structures.

Arguably, the so-called "smart money" — which includes institutional investors, central banks, funds, and other financial professionals — invests in stocks based on the fundamentals of a company.

The “smart money” shouldn't underestimate the ability of retail investors to support a stock like GME for a long period at rather high valuation levels.

Looking only at a company's fundamentals — without taking into consideration the impact of events such as "meme mania" — gives an incomplete story in the current market environment.

As many short-selling hedge funds continue to bet massively against GameStop, they continue to ignore the fact that GME is one of the most popular stocks on the internet. Its potential target for mobilized investing is the trump card that has been allowed GME to outperform tech giants this year.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• AMC shares have plummeted by more than 76% year to date, and the stock's short interest is on the rise.

• However, high borrow fee rates present a challenge for short sellers, eating into their profits.

• Unusually high numbers of FTDs indicate that AMC's stock price might be headed back up.

Read more from Wall Street Memes: SIRI, LCID, and GME: 3 Stocks With Short Squeeze Potential for November

A Lot of Traders Are Shorting AMC

So far in 2022, short sellers have made an estimated $1.85 billion in profits by shorting AMC Entertainment's  (AMC) - Get Free Report stock, according to S3 Partners.

Shares of the movie theater company have fallen more than 76% year to date, and AMC Preferred Equity (APE) units have tumbled 67% since their debut in August.

Short interest in AMC's stock increased 14% in October, although it has fallen about 2.5% in the past week.

The possibility of a short squeeze is still high. After all, short sellers do not get out of a profitable trade just because of a down week.

Currently, about 19.6% of AMC's available shares are being shorted, and short sellers are having to pay high borrow fees of 18%, on average.

Why Could Short Sellers' Profits Be Short-lived?

Even though short sellers are winning the battle against AMC's shareholders — so far — their gains may be short-lived, especially when you consider the current borrow fee rates for the stock.

When borrow fee rates are high — above 3% — short sellers are sometimes forced to close out their positions, burning through their remaining mark-to-market profits and abandoning the stock before the buy-to-covers drive the stock price up.

Besides confirming that there is a lot of demand from short sellers, AMC's high borrow fees put more pressure on short sellers to close their positions and take what profits they can.

Failures to Deliver Keep Adding Up

In trading, a failure to deliver (FTD) occurs when one of the parties in a transaction fails to fulfill their obligations by the settlement date. This can apply to stocks, futures, options, and other assets.

FTDs are particularly connected to naked short selling. Illegal since the 2008 financial crisis, naked short selling involves selling short a particular asset without owning or borrowing it. These non-existent shares are also called "phantom shares."

Interestingly, according to AMC CEO Adam Aron, one of the reasons for creating APE units was to shed light on any phantom shares.

The number of FTDs involving AMC and APE in recent months has been increasing considerably, reaching daily levels above 1 million FTDs several times during the first half of October and maintaining an average of 992,000 FTDs. See below.

To get a sense of how high AMC's FTD counts have been, compare them to Tesla  (TSLA) - Get Free Report, which has had average of 154,000 daily FTDs during the same period.

And fellow meme stock GameStop  (GME) - Get Free Report had a daily average of only 40,000 FTDs.

It's worth noting that, if short sellers have plans to enter an asset once the delivery restrictions are removed, the U.S. Securities and Exchange Commission (SEC) guarantees them 35 calendar days after settlement day to close the position by buying non-delivered securities.

Thus, after this 35 calendar-day period, there is a possibility that the share price of the asset may increase when these deliveries are made. However, this technicality is considered relevant only when there are very large numbers of FTDs — usually above 1 million, as in the recent case of AMC.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

A short squeeze occurs when a stock that many short sellers are betting against suddenly shoots higher, rather than lower. The short sellers are then forced to purchase the stock in order to cover their positions and get out of the trade before they lose even more money.

Right now, there are several stocks that look poised to become the next short-squeeze targets. Here are three we believe are destined for a squeeze in November.

Read more from Wall Street Memes: GameStop Stock: Halted During A Short Squeeze Play

SiriusXM

SiriusXM  (SIRI) - Get Free Report is a satellite radio and streaming service that sells subscription plans to consumers.

Recently, SiriusXM reported third-quarter earnings per share (EPS) of 7 cents, missing Wall Street's estimate of 9 cents per share. However, the company beat revenue estimates with $2.28 billion, a 4% year-over-year increase.

During the third-quarter earnings call, SiriusXM's CFO, Sean Sullivan, noted that the company saw strong subscriber growth in the quarter and announced an increase to the company's quarterly dividend.

"During the quarter, SiriusXM returned $262 million in capital to stockholders and ended the quarter with net debt to adjusted [earnings before interest, taxes, depreciation, and amortization] of 3.5 times. Today, we are also announcing a 10% increase in our quarterly dividend," he said.

However, many traders are still feeling bearish toward SIRI. In the last week of October, short sellers increased their positions by $7 million.

Currently, about $1.16 billion is betting against the stock. Bearish traders are shorting roughly 27% of the streaming company's stock float.

But to borrow the stock for their short positions, these traders need to pay fees of 11.3%, which is significantly high. When borrow fee rates are high, it means traders need to be extra-confident that the stock will plunge — or else they'll be out of a lot of money.

Traders have had a bad time shorting SiriusXM in 2022. Year to date, there has already been $8 million in mark-to-market losses.

But because of the large amount of short interest in the stock, along with high rates to borrow shares, it's possible that a short squeeze is imminent.

Lucid Group

According to S3 Partners, for a short squeeze to occur, not only must a high percentage of a stock's float be shorted, but there must also be a significant amount of cash involved in shorting the stock.

Lucid Group  (LCID) - Get Free Report meets both criteria.

The electric vehicle (EV) maker currently has about $1.94 billion betting against its stock. About 29% of its available shares are being shorted.

And short sellers who need to borrow Lucid shares are currently paying 7% in fees. Typically, borrow fee rates between 0.3% and 3% are considered normal. Percentages above this range indicate that there is a lot of demand for the stock from short sellers.

Most EV makers have suffered sizable losses throughout this year, and Lucid Group is no exception. Headwinds such as chip shortages, supply-chain disruptions, rampant inflation, and rising interest rates have been among the factors weighing against the stock.

Even though Lucid's stock has dropped 64% this year, the company's shares are still trading at a valuation that is considered quite stretched. Because Lucid has announced negative earnings, the company currently trades at a multiple of 133 times vs. the S&P 500's average of 2.3 times.

However, a lot of retail investors like Lucid, and there's been plenty of buzz on Reddit that a short squeeze may be in the works.

GameStop

GameStop  (GME) - Get Free Report currently has about $1.54 billion in short interest, and about 21.5% of its available shares are being shorted.

GameStop's borrow fee rate is currently near 10%, implying high demand from short sellers. In fact, GameStop was the most profitable stock for lenders in the third quarter.

But year to date, short sellers have lost about $9 million on GME.

Recently, S3 Partners CEO Bob Sloan said that GameStop could go "parabolic" if it breaks above $30. On October 31, trading in GameStop shares was halted twice by volatility triggers after the stock rose more than 9% before the market opened.

Even without a major catalyst ahead, GameStop continues to be one of the most popular names among meme-stock traders. And the company's Form 10-K states that short squeezes have been among the biggest triggers of volatility in the stock, especially since the end of 2020. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• GameStop's stock was halted twice on Monday due to a large increase in trading volume.

• It's likely the increased bullish trading activity in GME was part of a short-squeeze play.

• Thanks to meme-stock trends, looking only at the company's business fundamentals gives an incomplete picture of GME.

Read more from Wall Street Memes: Short Squeeze Alert: GME Is A Few Dollars From Going Parabolic Says S3 Partners CEO

Why Was GameStop Trading Halted on Monday Morning?

On October 31, trading in GameStop's  (GME) - Get Free Report stock was halted twice due to a considerable increase in trading volume.

When a stock moves too sharply in either direction, it sometimes triggers a volatility halt. When this occurs, trading in the stock is paused for five minutes, making it impossible to buy or sell the stock for that time.

In theory, volatility halts help keep the market on an even keel.

Volatility halts are quite common. GameStop's stock has already been halted several times this year.

During the past five days, movements in GME had indicated that a rally was in the works. GameStop shares jumped around 9% shortly after Monday's opening bell.

However, by the end of the day, GME's trading activity lost momentum. The stock ended the trading session up by only 1%.

Has There Been Another GME Short Squeeze?

The increase in trading volume that GameStop's stock has seen in the last few days is probably due to a short squeeze.

Short squeezes occur when a stock's price rapidly increases, forcing traders who are betting against the stock to buy shares to cover their positions.

In the case of GameStop's stock, retail investors have coordinated on social media sites like Reddit to pile into GME, causing short squeezes.

According to S3 Partners CEO Bob Sloan, a short squeeze in GME was inevitable if the stock crossed the $30 mark, which happened on Monday.

Short squeezes are more common in stocks that have a lot of money betting against them. Currently, about 20% of GameStop's stock float is being shorted — roughly $2 billion worth.

Sloan appeared in the Netflix  (NFLX) - Get Free Report documentary Eat the Rich: The GameStop Saga, likening the continuing trend of meme-stock short squeezes to the idea of the "Kardashian economics" effect in stocks like GameStop.

"The Kardashians are still here… apply that to the financial market and tell me whether you believe that socially mobilized investing is going to disappear," Sloan said.

What The "Smart Money" Keeps Missing About GME

The so-called "smart money" — which includes institutional investors, central banks, funds, and other financial professionals — invests in stocks based on company fundamentals.

But according to famed hedge fund manager David Einhorn, the way some stocks have performed this year, the market must be adopting alternative ways of calculating equity value.

Market structures are constantly changing, and investors need new strategies when betting both on and against a stock.

The smart money shouldn't underestimate the ability of retail investors to support a stock like GME for a long period of time at rather high valuation levels.

Looking only at a company's fundamentals — without taking into consideration the impact of events such as "meme mania" — gives an incomplete story.

As many short-selling hedge funds continue to bet massively against GameStop, they continue to ignore the fact that GME is one of the most popular stocks on the internet and has a high potential for short squeezes.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• GameStop has gained 12% over the past five trading sessions and has rebroken the $28 level.

• Bob Sloan, CEO of S3 Partners – who also appeared in the Netflix documentary Eat the Rich: The GameStop Saga – said that GME is a few dollars per share away from “going parabolic.”

• Sloan also commented on the need for long-term strategies to evolve in the face of new market structures.

Read more from Wall Street Memes: Tilray, SNDL, and Canopy Growth: What Does Wall Street Think of Pot Stocks?

GME Is Approaching The Threshold For a Sharp Upward Move

S3 Partners data analytics firm specializes in analyzing short activity, float, and financial risk. In a recent interview with Yahoo Finance, S3 Partners CEO Bob Sloan said that if GameStop  (GME) - Get Free Report stock goes above $30 per share, it could go parabolic.

Sloan points to the fact that there are about one to two billion dollars in short interest in GameStop, which could act as fuel for a new short squeeze.

Sloan added, though, that super-high short interest is not necessary to catalyze a short squeeze. Rather, short squeezes occur when shorts (however many there are) start experiencing unacceptable losses after a sharp uptick in an underlying share price.

When asked whether a darkening macroeconomic outlook provides a good reason to short stocks, Sloan responded by invoking the idea of "Kardashian economics." He believes that many short sellers are underestimating the risk of squeezes, claiming that events such as GameStop's squeeze should no longer be viewed as once-in-a-lifetime rarities.

"The Kardashians are still here. Look at that chest and apply that to the financial market and tell me whether you believe that socially mobilized investing is going to disappear." Said Bob Sloan on Netflix's "Eat the Rich: The GameStop Saga"

GameStop's Short-Interest Data

The latest GameStop short interest data from mid-October indicated that 20% of GME’s float - 53.88 million shares - was held short. That’s an uptick from 49.53 million in mid-September.

GameStop's borrow fees averaged 9% throughout October. While that’s a lower rate than earlier this year, it’s still a hefty percentage. That fee rate can put some extra pressure on short sellers to cover their positions in the event of a sudden upward movement.

Thanks to GameStop's high borrowing fees, the stock was the most profitable equity in the North American lender market, generating more than $100 million in revenue for lenders.

Thus far, though, short sellers have been able to recoup their borrow fees and then some. S3 Partners’ data indicate that, by September of this year, GameStop short sellers had made approximately $212 million in 2022 mark-to-market profits.

Is Value Investing Dead?

During the same interview, Sloan commented on long-term strategies being adopted by the market, especially in light of Big Tech’s meltdown this earnings season.

Sloan mentioned a recent speech from the hedge fund manager David Einhorn, who became a billionaire by identifying undervalued and overvalued stocks through the value investing philosophy.

"Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value," Einhorn wrote in an investor letter to clients.

Einhorn's words, according to Bob Sloan, indicate that markets are evolving. When considering current market structures, investors need new strategies not only on the short side but also on the long side.

Bob Sloan sees Meta as an example of danger on the long side because it is one of the most-held stocks held by hedge funds. Persistence in long positions quarter over quarter is quite high and, looking at the positions of several hedge funds, it is quite logical to assume that severe losses are occurring on the long side.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Credit Suisse's latest take on AMC, based on the movie theater chain’s financial fundamentals, is that shares are headed below the $1 mark.

• Ironically, Credit Suisse is itself in a precarious financial situation and may end up as a penny stock soon.

• In spite of high borrow rates, short interest in AMC remains elevated. Plenty of investors are, like Credit Suisse, betting the theater company will tank.

Read more from Wall Street Memes: Tilray, SNDL, and Canopy Growth: What Does Wall Street Think of Pot Stocks?

A Bear Case on AMC

Credit Suisse recently joined the ranks of AMC bears. Their analysts rated shares of the theater chain a “sell” and offered a price target of $0.95.

The Swiss bank's thesis rests on AMC's future profitability, or lack thereof. Despite theater attendance rates ticking back up as the pandemic has waned, AMC still has yet to see healthy returns on its balance sheet.

During AMC's latest Q2 results, the company announced revenues of $1.1 billion - that’s an increase of $444 million from the same period in 2021. However, those revenues are about 26% below 2019’s Q2, indicating moviegoers still have not returned to full-force levels post-pandemic.

During Q2, AMC reported net losses of $121.6 million. That’s a significant improvement over Q2 2021 when AMC lost $344 million. But again, AMC fell short of its 2019 numbers. During Q2 2019, AMC reported profits of $49.4 million.

Among the few Wall Street firms that have been covering AMC stock in recent months, the most recent take came from B. Riley, which offered a less bearish take. B. Riley analyst Eric Wold maintained his “hold” position and lowered his price target to $7.50 - that suggesting an upside of almost 15% from current levels.

Pot Meet Kettle?

Turning an eye towards Credit Suisse itself, we find another stock that could fairly be valued near penny stock levels. Today, Credit Suisse (CS) shares are worth less than $4 per share - that means they’re closer to hitting the $0.95 mark than AMC shares are.

In this year alone, Credit Suisse shares have plummeted almost 60%. They are now down more than 94% since their all-time high in 2007.

Analyst teams at investment banks routinely recommend buying or selling certain stocks based on their business fundamentals.

However, with its own business in turmoil and its survival being questioned by many in the market, AMC investors have questioned the credibility of Credit Suisse in their prediction that the movie theater chain will sink below $1 per share.

"When will the CNBC article come out with Credit Suisse telling investors to sell Credit Suisse as It is headed to $1? LOL" said a Reddit user in an AMC subreddit community.

More and more investors have turned their attention towards CS’s rapid decline, with many being concerned about potential knock-on effects. Slowing investment banking revenues, losses related to its Russian business, and compiling litigation costs have been disastrous for the investment bank.

To make matters worse, Credit Suisse recently announced a major layoff plan as part of a restructuring of its business. The plan involves cutting about 9,000 employees - that’s after 2,700 of its full-time staff have already been laid off.

The bank plans to raise billions of pounds from Saudi investors in a new round of funding.

AMC’s High Short Interest

Focusing back on AMC, we find that the company continues to attract high short-selling interest from all sides. In a bear market where fundamentals have come under extra scrutiny, high growth and high-risk stocks - especially meme stocks - have been hard hit. Speculative assets such as AMC are prime targets of short sellers.

Recent data point out that, as of August 13th, about 104.3 million AMC shares were sold short; that comprises a little over 20% of the company's total float.

During Q3, however, short-interest activity decreased in the U.S. market by about 6%, according to S3 Partners. Part of this can be explained by higher borrowing fees being levied on more volatile stocks. AMC borrow fees averaged an eye-popping 20% during October.

Those high rates add pressure to short sellers, who will need to see greater drops in AMC’s share price in order to recoup their borrow costs. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• The Wall Street consensus for Tilray is that the stock is a hold.

• Analysts were pleased with SNDL's expectation-beating second-quarter results.

• Wall Street has mixed feelings about Canopy Growth's upcoming Canopy USA consolidation.

Tilray

Among the analysts who have been covering Tilray's  (TLRY) - Get Free Report stock for the past three months, the consensus is that the Canadian cannabis company is currently a hold. Two of the eight analysts believe the stock is outperforming, while two others believe it is underperforming. The remaining analysts are on the fence.

The company reported its first-quarter fiscal 2023 results in early October. It missed both on earnings per share and revenue estimates, causing the stock to plummet about 25%. So far this year, Tilray's stock has fallen over 50%.

On the bearish side, Benchmark analyst Mike Hickey — who already had a sell recommendation on Tilray — lowered his price target on the company even further, to $2 per share.

Hickey said that, although he is optimistic about the possibility of legalization in the U.S., he doubts that this will happen in the near term.

On the bullIsh side, Cowen analyst Vivien Azer maintained her buy recommendation on Tilray, with a price target of $9 per share. According to Azer, Tilray has been showing signs of stability and believes that its losing streak will end.

Further, the Cowen analyst believes that Tilray's recent earnings results were fairly in line. And she noted that the company's gross margins were better than expected.

The fact that Tilray's management reiterated its outlook for fiscal 2023 — between $70 million and $80 million in adjusted earnings before interest, taxed, depreciation, and amortization (EBITDA) — reinforced Azer's bullish thesis.

SNDL

The newly rebranded SNDL  (SNDL) - Get Free Report — formerly Sundial Growers — receives far less coverage on Wall Street. In the last three months, there have been only two analysts providing ratings on the Canadian cannabis company.

Canaccord Genuity analyst Shaan Mir is one of them. After SNDL reported its second-quarter earnings in mid-August, Mir changed his neutral recommendation to a speculative buy, forecasting a price target of $5 per share. That would indicate an upside of more than 100% from SNDL's current price.

In its earnings announcement, SNDL reported strong, expectation-beating revenue results, driven mainly by liquor and cannabis retail sales.

The other analyst covering SNDL is Cantor Fitzgerald's Pablo Zuanic, who has a neutral recommendation on the stock. Zuanic has set a $3.50 price target on SNDL, which would suggest an upside of nearly 50%.

During the second-quarter earnings call with SNDL CEO Zach George, the analyst expressed concern about the company's 50/50 joint-venture deal with SAF Group through SunStream Bancorp, a company that aims to invest in cannabis-related verticals.

According to Zuanic, SNDL has a balance sheet of nearly $500 million yet apparently needs the help of other companies. There are other cannabis companies that have been able to operate on their own with seemingly better results.

Canopy Growth

Canopy Growth  (CGC) - Get Free Report shares are down about 66% so far this year. And the consensus on Wall Street is not the most optimistic. Among the eight analysts who have covered Canopy over the past three months, four have sell recommendations, while only one has a buy recommendation.

Canopy Growth has been prominent among cannabis companies recently following its announcement to speed up entry into the U.S. marijuana market with a new holding company, Canopy USA. This newly formed company will also house Acreage Holdings, Wana Brands, and Jetty.

This move sent shares of the company up nearly 27% in a single session, with repercussions for cannabis stocks in general.

The announcement of the new holding company also prompted Canaccord analyst Matt Bottomley to upgrade Canopy Growth from hold to sell, aiming for a price target of $3.12. Pablo Zuanic of Cantor Fitzgerald also upgraded his neutral recommendation on Canopy with a price target of $3.05.

However, Stifel analyst W. Andrew Carter, who is bearish on Canopy, reiterated his sell recommendation, forecasting a $2.13 price target following the Canopy USA announcement.

Carter has a negative view of this transaction due to the long timelines, complexity, capital costs, and other near-term costs that are expected to arise. He believes this should not alleviate the company's main problems, which are cash burn and balance sheet risks.

As a consequence, the Stiefel analyst believes the formation of Canopy USA will create "asset price inflation across the sector" and work against cannabis stocks as a whole.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Shares of several retail investor favorites that have been the targets of short-sellers soared during the October 25 trading session.

• Shares of Bed Bath & Beyond, AMC Entertainment, and GameStop have likely seen minor short squeezes in recent days.

• Several lesser-known but heavily shorted e-commerce stocks have also rallied in recent trading sessions.

Why Is Short Activity Slowing Down?

Short-selling activity is slowing down this year. Despite broad market turmoil caused by rampant inflation and rising interest rates, short interest in U.S. stocks is lower than it was in 2021.

According to the latest report by S3 Partners, during the third quarter (Q3), short interest in the U.S. market decreased by about 6% compared to the previous quarter.

The report also pointed out, that during July, short sellers actively reduced their short exposure with buy-to-covers in several sectors in anticipation of a market floor. In August, the sequence of buy-to-covers continued, but less aggressively. And September saw some $28.5 billion in short covering, dwarfing the $28 billion seen in the previous two months.

Technology and consumer discretionary are the two main sectors where short exposure was concentrated, at $164 billion and $138 billion, respectively. Interestingly, only two sectors had higher short exposure in the third quarter. As the report pointed out, the energy sector grew by $2.6 billion in short positions, and the SPAC (special purpose acquisition company) sector grew by more than $100 million.

Another possible reason for the reduction in short selling could be that borrow fees for these stocks have risen.

Stock lending activity in Q3 increased considerably in the North American region, as pointed out in DataLend's report. The region generated about $1.3 billion in stock lending revenue, a 35% year-over-year increase. We can attribute this to the average borrow fee rate being 37% higher.

What About Meme Stocks?

Bullish sentiment is returning to so called "meme stocks" — with minor short squeezes likely occurring.

Bed Bath & Beyond  (BBBY) - Get Free Report was a big winner during the October 25 trading session. The home-goods retailer's stock was up as much as 27% during the trading session. Data from Morningstar points out that around 106% of BBBY's float is being shorted.

One explanation for short interest above 100% is that it's due to the addition of actual shares plus "synthetic" positions in the stock. In this case, investors end up borrowing and buying shares twice. As for BBBY's borrow rates, they averaged 9% throughout October.

GameStop  (GME) - Get Free Report, meanwhile, rose nearly 9% during the same trading session. The combination of short interest near 20% and borrow fees near 10% also makes GameStop a massive short-selling target.

Finally, AMC Entertainment  (AMC) - Get Free Report also had a positive trading session, rising 6%. Its AMC Preferred Equity shares (APEs) have recently risen nearly 30% in the last five trading sessions as well. AMC borrow fees are currently close to 20% — which signals that short sellers might have problems covering their shares.

Although it's unlikely that, under the current market conditions, massive short squeezes will occur, minor squeezes can still be seen in the short term.

When the broader market rallies, the increase in trading volume naturally tends to put pressure on short sellers.

Short Squeezes in E-commerce Stocks

Meme stocks aren't the only targets of brutal short selling. Recently, some lesser-known names have also seen strong bullish moves, possibly due to minor short squeezes as well.

During the October 25 trading session, e-commerce sector stocks like The Real Real  (REAL) - Get Free Report and Carvana  (CVNA) - Get Free Report jumped nearly 18% and 10% respectively. Retail investor favorite Solo Brands  (DTC)  and Blue Apron Holdings  (APRN) - Get Free Report even registered highs of 12% and 9%. respectively.

It's likely that these heavily shorted stocks saw squeezes due to the rally in stocks in general over the past few days.

According to Baird economist Ross Mayfield, lower Treasury yields have improved the market's mood. Investors have been turning into a zone where the Fed is expected to pivot. Part of this is due to Fed officials saying that and part is due to softer economic data.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Stock lending data for the third quarter indicates that institutional investors are shorting stocks as a hedge against market downturns.

• In the third quarter, AMC Entertainment was the fifth highest-earning stock for equity lenders.

• Borrow fees – which short sellers must pay to borrow shares of the stock they wish to bet against — are still very high for AMC.

Why Are Institutional Investors Increasing Short Positions?

The current bear market — compounded by high inflation and rising interest rates — has led many institutional investors to adopt strategies other than buy-and-hold investing.

An increase in stock lending in the third quarter (Q3) showed that these investors are leaning more heavily into short-selling stocks.

According to a report from DataLend, the global securities lending market generated $7.45 billion in Q3. That's a year-over-year increase of 8%.

As the lending team at investment bank Brown Brothers Harriman (BBH) wrote, this year's "untested and unfamiliar" macro environment has heightened investors' focus on market fundamentals.

These investors have been increasing short positions in companies with negative earnings and overvalued fundamentals, using them as a hedge against market downturns.

As the BBH team wrote, "This generated some positive momentum creating a depth in the hard-to-borrow market in the U.S. Most notably, the demand concentrated on the "meme stocks," such as AMC and GameStop, which continued to attract attention and command high fees."

AMC Was Among the Top Five Equity Earners in Q3

According to the recent DataLend report, AMC Entertainment was the fifth highest-earning equity for stock lenders in the third quarter.

As the report pointed out, in Q3, the securities lending industry showed expressive revenue growth in the North American region (see the chart below). This was due to growth in several sectors, including consumer discretionary, communication services, and consumer staples.

Video game retailer GameStop  (GME) - Get Free Report, considered the first meme stock, was the most stock for lenders in Q3, followed by Beyond Meat  (BYND) - Get Free Report, Lucid Group  (LCID) - Get Free Report, and Sirius XM  (SIRI) - Get Free Report. In fifth place, AMC Entertainment  (AMC) - Get Free Report rounded out the top five.

Because short sellers borrow stocks to bet against a certain company, we can conclude that the top five companies on the list are all targets of high short-selling activity.

These stocks have become short-selling targets because the macro scenario has hurt their business fundamentals. Except for Sirius XM, the five companies have reported negative earnings.

Short Sellers Are Willing to Pay High Fees to Short AMC

AMC Entertainment generated $2.63 for security lenders in the third quarter. About $1.3 billion came from North American equities — a 35% year-over-year increase. This was due to higher borrow fees. In the third quarter, borrow fee rates rose by an average of 37%.

Borrow fee rates are influenced mainly by the laws of demand and supply. When demand for a certain asset rises, generally, the fees get higher.

The latest data from Interactive Brokers shows that AMC's borrow fees are very high — 18% annualized.

On average, AMC's borrow fee rates stayed below 10% in July and August after a stock rally driven by earnings and CEO Adam Aron's so-called "wen pounce." This anticipated the creation of AMC Preferred Equity (APE) units.

After the APEs started to trade publicly, AMC's borrow fee rates quickly climbed higher than 20%.

Meanwhile, APE units currently have a more modest borrow fee rate of 4.7% (see below).

I have warned in previous articles that high borrow fees require short sellers to have extra confidence that the stock will go down.

Despite a lot of skepticism regarding AMC's fundamentals, there is a lot of risk in paying borrow fees close to 20% to bet against the movie theater chain. That's especially the case because AMC has already fallen 83% from its peak in June 2021.

Considering the volatile nature of AMC — and the fact that a large part of its float is owned by retail investors — any further "meme" rallies would not be a surprise and could still be lethal for short sellers, considering high borrow fees.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Shares of Chinese EV maker Nio have plunged more than 80% from their most recent peak.

• A number of macroeconomic and geopolitical headwinds, including regulatory pressure from Beijing, have affected the share prices of Chinese stocks in general.

• Wall Street believes Nio's shares are undervalued by as much as 250%.

(Read more from Wall Street Memes: Here Is the Only Wall Street Analyst "Not Bearish" on GameStop Stock)

Is NIO a Speculative Tech Stock?

Nio  (NIO) - Get Free Report is an electric vehicle (EV) maker based in China. In the past couple of years, it has been priced as a speculative tech stock and has earned stretched valuation multiples.

At one point, the company reached a market cap above $95 billion, which is especially remarkable considering that Nio itself doesn't expect to generate a profit until 2024.

Recently, Scion Asset Management fund manager Michael "Big Short" Burry criticized U.S.-listed companies with market caps over $1 billion and EBITDA (earnings before interest, taxes, depreciation, and amortization) below negative $100 million.

According to Burry, this is "silliness."

Of the companies that have met Burry's criteria in the last 12 months, Nio is among the top 20. That's made the EV company extremely vulnerable to this year's inflationary headwinds.

How Do Geopolitics Affect Chinese Stocks?

In addition, Beijing regulators have been cracking down on Chinese companies that list shares on U.S. exchanges, citing security risks.

Several Chinese tech giants, including Alibaba  (BABA) - Get Free Report, JD.com  (JD) - Get Free Report, and Baidu  (BIDU) - Get Free Report, have faced the threat of delisting because they failed to comply with the U.S. Securities and Exchange Commission's (SEC) requirements for transparent accounting methods.

That caused many investors to pull out of these stocks, sending their shares plummeting in the first half of the year.

However, recently, the Chinese regulators have rethought their strict policies for U.S.-listed companies, calming investor fears.

But this week, the announcement that Chinese President Xi Jinping will rule for an unprecedented third term, as well as the news that he had stacked the Politburo Standing Committee with loyalists, has rekindled investor fears.

How Has Nio Performed?

Nio has been delivering vehicles at a pace that has exceeded market expectations. But that hasn't been enough to make up for the macro situation.

In September, Nio delivered around 10,900 vehicles — a nearly 2% year-over-year increase — despite production headwinds from China's strict zero-COVID policies.

According to Mizuho analyst Vijay Rakesh, Nio's focus on the domestic Chinese market puts it at an advantage when it comes to regulatory support.

Even with stocks reacting badly to President Xi Jinping's third-term announcement, China’s economy is slowly giving signs of strengthening.

China's third-quarter GDP report beat market expectations, pointing to 3.9% growth year over year and 0.4% growth from the previous quarter.

Industrial production growth was also well above expectations, at 6.3% vs. 4.5%. According to Goldman Sachs analyst Andrew Tilton, the broad view is that the Chinese economy is still operating well above its potential this year.

The Bottom Line

Even though it has fallen more than 80% from its peak, Nio's stock is still no bargain. However, it is much more attractive than it has been in the last two years.

NIO is currently trading at a price-to-sales ratio of 2.6 vs. an automotive industry average of 0.8. It currently has a valuation of $14.82 billion.

Being a speculative tech stock, NIO has been struggling thanks to its stretched valuation, as well as a number of headwinds including inflation, COVID lockdowns, and regulatory issues.

But the company's business fundamentals and future growth plans still look strong.

Wall Street is very confident in the company's future, believing it will benefit from global expansion and from the growing EV market. The consensus among analysts is a unanimous strong buy, with the stock being undervalued by as much as 250% with a current price of $9 per share. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Snap shares took a dive after the company reported Q3 revenues that fell well below expectations.

• A round of Wall Street price target cuts followed. Here, we highlight the opinions of Morgan Stanley, which reiterated its bearish stance on the social media company.

• About eighteen months ago, in a very different macro scenario, Morgan Stanley analysts saw Snap reaching $80 per share.

(Read more from Wall Street Memes: Is GameStop Chair Ryan Cohen the New Carl Icahn?)

Snap Has Tumbled... Again

Earnings calls have become nightmares for Snap  (SNAP) - Get Free Report investors this year. Last quarter, in Q2, Snap fell nearly 40% after releasing roundly disappointing results. The company missed both revenue and earning expectations and offered poor forward guidance.

Q3 didn’t look much better. Snap shares plummeted a further 30% after the company again reported weaker-than-expected revenue.

Although revenues fell compared to the previous quarter, Snap did manage to grow revenues by 6% YoY. Its daily active users also jumped by 20% YoY. But gains were offset by a decline in revenue per user (ARPU), which dropped 11% compared to the same period last year.

For the quarter, Snap reported earnings per share of eight cents. Yet the social media company still reported net losses of $360 million, an increase of almost 400% YoY. Included within that $360 million figure was $155 million in restructuring charges.

Snap's management blamed the slowdown in its revenues on platform policy changes, macroeconomic headwinds, and increased competition. Inflation and rising costs of capital have pressured Snap's advertising partners to reduce their marketing spending, according to Snap's letter to investors.

The Bear Case Is Playing Out, According To Morgan Stanley

It’s been just about impossible to sustain a bullish view on Snap stock this year. The latest price target cut to the company comes from Morgan Stanley analyst Brian Nowak, who reiterated his underweight rating for Snap, and updated his price target to a measly $7 per share – that’s a whopping 91% decrease from Morgan Stanley’s SNAP price target at the beginning of last year.

According to Nowak, Snap's recent results reinforce his and his team’s concerns about advertisement growth. Weak brand confidence, high management execution risk, and a troubled macroeconomic backdrop combine to paint an overall bearish picture.

The analyst also points out that a decline in time spent on the platform by U.S. users raises new questions regarding further growth and differentiation.

A Cheerleading Bull Not So Long Ago

About eighteen months ago, Morgan Stanley raised its price target on Snap shares from $50 to $80 per share. On February 21st of 2021, Snap was trading at around $65 per share.

At the time, the bank had upgraded the social media company to “overweight” based on its belief that the company’s Snap, Discover, Spotlight, and Maps features were paving a path toward greater monetization.

Morgan Stanley analysts claimed that its bullish base case was driven by Snap’s strong earnings power in the US. Should all of Snap’s features reach their full monetization potential, Morgan Stanley’s team claimed, the stock may even hit $105.

However, Snap shares collapsed in early 2022 and have sunk after every earnings call since. Morgan Stanley's “buy” recommendation was replaced by a “sell” recommendation this October.

How Did They Get It So Wrong?

Companies such as Snap, which are priced according to their growth expectations rather than their profitability, have been absolutely pummelled by the market’s high-inflation and rising-interest-rates environment.

At the beginning of last year, the backdrop was far more euphoric. But it seems that many tech and growth bulls got carried away and, at some point, completely abandoned business fundamentals.

On September 24, 2021, Snap's market cap was an astonishing $113 billion. At that time, Snap's Enterprise value/EBITDA (EV/EBITDA) was negative -175.9 times, indicating an essentially untenable valuation.

Today, Snap's market cap has dropped below $18 billion, but that’s still far from cheap. The company’s EV/EBITDA ratio is at -19.8. Better than -175.9 - but still negative.

Snap’s rich valuation puts the company under high pressure to achieve continued long-term growth. It also leaves SNAP shares vulnerable to massive selloffs when the company fails to achieve its growth trajectory – as we saw after Q2 and Q3 earnings.

Snap's weak growth performance this year raises doubts as to whether the stock has actually bottomed. Macro headwinds still show no signs of easing in the short term, and the company has yet to provide any evidence of a turnaround.

Thus, even though Snap's valuation has already been heavily discounted from its peak, we still think SNAP shares are far from cheap. This is not a “buy-the-dip” scenario just yet.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• The U.S. securities lending market grew considerably this year. An increase in average fees, due to high demand for meme stocks, was a big driver of growth.

• GameStop stock currently sports very elevated borrow fees, which indicates that there is a lot of short interest.

(Read more from Wall Street Memes: Here Is the Only Wall Street Analyst "Not Bearish" on GameStop Stock)

A Bit of Context

The securities lending market involves the lending of certain securities to institutional investors - usually banks and broker-dealers. This practice requires the borrower to provide collateral in the form of cash or security.

This process allows broker-dealers and investors to participate in activities such as market-making, short-selling, and more.

According to the SEC, securities lending and borrowing are considered integral to overall market structures and help many mutual funds and pension funds generate additional revenues.

Securities Lending Latest Data

EquiLend Data & Analytics recently provided a report on global securities lending activity during Q3. According to the firm, in 2022 thus far, the securities lending market has generated $7.45 billion. That represents an 8% YoY increase.

Drilling down into Q3, we find that securities lending generated $2.63 billion, which represents a 12% YoY increase. Of that amount, about $1.3 billion - nearly half - came from North American equities. That $1.3 billion equates to a robust 35% YoY increase; experts attribute this growth to a surge in average fees, which have grown 37% over the same period.

EquiLend’s report further points out that several asset classes played key roles within an increasingly volatile market. Recessionary concerns and pessimism over a high-inflation, high-interest rate environment spurred increased shorting activities.

The lending team at Brown Brothers Harriman & Co. (BBH), one of the largest private investment banks, provided a big-picture market assessment for the second half of 2022.

They claim that due to this year's "untested and unfamiliar" macro environment, investors are looking to refocus on market fundamentals. Short selling, meanwhile, has been increasingly used as a hedge against market downturns, with fundamentally overvalued meme stocks being a common target.

"This generated some positive momentum creating a depth in the hard-to-borrow market in the U.S. Most notably the demand concentrated on the "Meme Stocks", such as AMC Entertainment and GameStop, which continued to attract attention and command high fees." - as per the assessment of the BBH securities lending team.

GameStop As The Top Equity Earner

The securities lending industry's strong Q3 revenue growth in North America was closely tied to growth in several key sectors, such as consumer discretionary, communication services, and consumer staples.

Within consumer discretionary, which GameStop  (GME) - Get Free Report and Lucid Motors  (LCID) - Get Free Report are part of, saw 80% growth in their lending revenues. The former was the top equity earner, generating revenues totaling $102,591,665.

Keep in mind, this number corresponds to the fees collected by intermediaries, not the total value of shares lent.

Within the communication and entertainment services sector, AMC Entertainment  (AMC) - Get Free Report and Sirius XM  (SIRI) - Get Free Report saw triple-digit revenue increases. Also of note, the consumer staples sector, saw a stunning YoY increase of almost 300%, headed by Beyond Meat   (BYND) - Get Free Report.

GME's Cost To Borrow

The cost of borrowing a stock varies based on the laws of supply and demand. Among the influencing factors are utilization (the number of shares available to sell short), liquidity, and volatility.

Thus, it follows that high borrowing rates indicate a high demand to short a stock, and vice versa. Generally, average borrow rates fall between 0.3% and 3% per year.

However, if a particular stock is heavily shorted, it is not uncommon to see fees above 20% or much higher.

Currently, GameStop's borrow fees are at 9.3% per year. According to data provided by Interactive Brokers, GME’s borrow fees have hovered at that level for much of October.

At other points this year, GameStop's borrowing fees have been much higher. Until early August, for example, GameStop's stock borrow rates stood at an annualized percentage of 32.5%. At the end of May, for example, they spiked to an eye-popping 110%.

High borrow fees make shorting a stock more expensive and put extra pressure on short sellers. And even though GameStop's current borrow fees are below the sky-high levels seen earlier this year, a 9.3% annualized fee is still significant. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Several Wall Street firms abandoned their coverage of GameStop after the so-called "meme mania" ended.

• Among the few analysts covering GameStop this year, the consensus is pessimistic.

• However, there is one Wall Street firm that is not bearish on GME with a price target that suggests an upside from current levels.

(Read more from Wall Street Memes: Is GameStop Chair Ryan Cohen the New Carl Icahn?)

An Unpopular Opinion on Wall Street

Since the meme mania that caused massive short squeezes in early 2021 ended, most Wall Street firms have dropped their coverage of GameStop's  (GME) - Get Free Report stock. That's because analysts believe that the stock is trading according to factors other than its business fundamentals.

In the last 10 months, only three Wall Street firms have provided recommendations regarding GameStop's stock.

Among them is Ascendiant, which earlier this year recommended selling GameStop shares and forecast a price target of $5.75 by the end of this year. Ascendiant analyst Edward Woo wrote that he believed Reddit-involved trading would trigger short-term rallies and that his trend would cool due to GameStop's weak earnings outlook.

Wedbush is another Wall Street firm with a sell recommendation on GameStop. About a month ago, analyst Michael Pachter upgraded his price target on GME to $6 per share. Pachter has been called "Mr. Negative" by none other than CNBC's Jim Cramer for being an avid pessimist regarding the GameStop meme saga.

The only one among the three analysts currently covering GameStop not to have a sell recommendation is Jefferies' Andrew Uerkwitz. He took over coverage of GME with a neutral recommendation and a price target of $26.

That would imply an upside potential of nearly 5%, considering GameStop's share price at the time of writing this article.

Is Jeffries the Pro-Meme Firm?

Before Andrew Uerkwitz took over GameStop coverage for Jefferies, the firm was already drawing attention for its bullish share price prediction compared to its peers on Wall Street.

Analyst Stephanie Wissink, who was previously responsible for covering GameStop at the firm, maintained a neutral recommendation on the stock with a price target of $27.50.

She liked the company's ability to shift toward digital platforms and infrastructure, backed up by robust customer relationship management, which she thought would unlock value for the company's e-commerce business beyond its retail peers.

Interestingly, Jefferies is also worthy of attention due to its price target on another meme stock, Bed Bath & Beyond  (BBBY) - Get Free Report.

Analyst Jonathan Matuszewski has a neutral recommendation on Bed Bath & Beyond shares but predicts a price target of $7, which would imply an upside potential of nearly 40%, considering BBBY's current share price.

The Jeffries analyst also set a bullish price target on BBBY due to its business fundamentals. Matuszewski believes that the home-goods retailer's current turnaround plan will be more successful that previous attempts.

GameStop and Bed Bath & Beyond's Sales Agent

Here's a curious fact regarding Jefferies (JEF) - Get Free Report, GameStop, and Bed Bath & Beyond. Jefferies' investment banking unit was the sales agent responsible for GameStop's 2021 "at the market" offering program. Through that program, the company sold more than 5 million common shares.

According to GameStop, Jefferies received a 1.5% commission from the sale of its shares. Considering that the sale raised about $1.13 billion, this would have earned Jefferies about $16.9 million.

More recently, Jefferies has also been responsible for Bed Bath & Beyond's offering program, by which the company plans to sell 12 million shares.

The prospectus issued by Bed Bath & Beyond confirms that Jefferies may be entitled to a commission of up to 3% of the gross proceeds from the sale of BBBY common stock.

It's not unusual for analysts at an investment bank to be bullish on a company it is working with. However, investment bankers and equity research analyst tend to stay free from conflicts of interest.

To be clear, there is no evidence that anything untoward occurred in the case of Jefferies and these two meme stocks. This should just be another "probably nothing" case.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Brokerage firms charge fees to investors who wish to borrow shares to sell short.

• Borrowing fee rates are determined by supply and demand, plus some other factors.

• AMC borrow fee rates are currently high. So short sellers must have extra confidence that the stock will fall for the fees to be worth it.

(Read more from Wall Street Memes: Is GameStop Chair Ryan Cohen the New Carl Icahn?)

What Are Stock Borrow Fees?

Stock borrow fees are the amount that a trader must pay in order to borrow a stock to bet against in a short trade. These fees are applied daily.

The cost of borrowing a stock varies based on the law of supply and demand. Among the factors are utilization (the number of shares available to sell short), liquidity, and volatility.

The common range of borrow fee rates is 0.3% to 3% per year. However, when there is high demand for a short sale target, it's not uncommon to see borrow fees exceeding 20%.

According to analyst Ihor Dusaniwsky of S3 Partners, borrow rates can provide valuable information to investors considering a stock trade: "An increase in stock borrow rates may force (squeeze) some short sellers into closing their positions — getting out to realize their remaining mark-to-market profits and exiting before other buy-to-covers drive the stock price up."

The Latest Data on AMC and APE Borrow Fees

Looking at the borrow fee rates for AMC Entertainment  (AMC) - Get Free Report stock, the latest figures provided by Interactive Brokers show annualized fees of 18.6% — which is considered a very high percentage.

These high fees confirm that there is lots of demand for short-selling AMC's stock.

On average, the stock's borrow fee rates were below 10% between July and August, after a stock rally driven by AMC's earnings and the "wen pounce" staged by CEO Adam Aron, which anticipated the creation of AMC Preferred Equity (APE) units.

At the end of September, roughly 100 million shares of AMC were being sold short. That's nearly 20% of the company's stock float and significantly higher than the number of shares being shorted in mid-August (89.1 million).

Meanwhile, APE units currently have a more modest borrow fee rate of 4% (see below).

About 35.5 million APE shares are being shorted — that's about 2.8% of its float. The current short interest is lower than it was in mid-September, when about 44 million shares of APE were being shorted.

Part of this short interest contraction can be attributed to a strategy recently revealed by famed short-selling investor Jim Chanos. The founder of Kynikos Associates said during an interview with CNBC that he is "buying the spread" with a short position on AMC and a long position on APE.

"We are still long the spread... it's silly. They are the same piece of paper ultimately," Chanos said.

Extra Confidence Is Required for AMC Shorts

Over the past two months, AMC's borrow rates have indicated that there is very high demand for shorting the stock. In fact, demand is much higher than it was at the beginning of the year.

We can explain this demand by looking at several macroeconomic headwinds, including rising interest rates and the effect of unfavorable unemployment data on the markets.

There are also other headwinds related to the movie theater business. AMC rival Cineworld has filed for bankruptcy, and the third-quarter slate of new movie releases was weak.

In addition, the potential sale of 425 million APE units could result in share dilution and a lower stock price. This has also likely had a negative effect on shareholder sentiment.

However, with borrow fee rates around 20%, short sellers need to be highly confident that AMC stock will fall further. Otherwise, these high fees could prevent them from profiting.

Not only that, but finding available AMC stock to borrow can also be a problem. The stock's utilization rate is 100%, its highest percentage since February, according to Ortex data.

When a utilization rate is at its maximum, this means that, at the start of each trading morning, all available shares have been borrowed. When this happens, short sellers need to be more resourceful to find shares.

Finally, despite concerns about its business fundamentals, AMC's liquidity position doesn't present a bankruptcy risk for now. Therefore, it is quite unlikely that the stock will go to zero and time soon.

Short sellers are playing with fire by paying borrow fee rates around 20% to continue betting against AMC. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Carl Icahn is well known in the financial world as a pioneering activist shareholder.

• The strategy of buying sizable stakes in large companies and using voting power to promote shareholder benefits has led Icahn and other corporate raiders to build fortunes.

• Ryan Cohen has been gaining a lot of influence in the financial markets after his successful activism as a GameStop shareholder.

Carl Icahn: The Activist Shareholder Pioneer

One of the best-known personalities on Wall Street, Carl Icahn is a billionaire on the Forbes 400 list who made his fortune mainly by being a shareholder activist. Icahn holds the belief that, by pushing for corporate change, he can generate greater benefit for shareholders as a whole.

Icahn has a reputation as a "corporate raider." In business circles, this term refers to the process of buying a large share of a company and using voting rights to take specific actions.

But sometimes Icahn's vision of maximizing shareholder value doesn't necessarily align with the company's management practices.

One of his most notorious feats of shareholder activism was his "hostile takeover" of Trans World Airlines (TWA) in the 1980s. Icahn pocketed about $469 million from the sale of the airline to American Airlines  (AAL) - Get Free Report.

Icahn made similar moves with RJR Nabisco, Marvel Comics, Blockbuster, Time Warner, and Texaco Oil, which netted him $700 million.

Today, Icahn's net worth is about $22 billion. Currently, he is chairman of Icahn Enterprises  (IEP) - Get Free Report, a multi-industry investment firm that trades on the Nasdaq.

I recommend watching a documentary on HBO about Carl Icahn called Icahn: The Restless Billionaire to learn more about his story.

Ryan Cohen: The Modern Activist Shareholder

Former Chewy  (CHWY) - Get Free Report CEO Ryan Cohen is currently the chairman of GameStop  (GME) - Get Free Report, He's an activist shareholder through his RC Ventures holding company.

Unlike most activist shareholders, which are typically hedge funds funded by investors and institutions, Cohen made his fortune through Chewy. The company went from a pet e-commerce startup to a $3.35 billion company by 2017, when it sold to PetSmart.

After the sale of Chewy, Cohen became Apple's  (AAPL) - Get Free Report largest individual shareholder. He bought 6.2 million AAPL shares in 2020.

That year, Cohen also acquired about 10% of GameStop's total shares — which he later increased to almost 13% — becoming GameStop's largest individual investor.

However, Cohen's investment in GameStop could not have been timed better. After buying his stake in GameStop, shares of the video game retailer soared as much as 2,500% during the "meme mania."

His purchase was even chronicled in the recent Netflix series Eat the Rich: The GameStop Saga.

Cohen did not stop there. He became increasingly involved in the company to advocate for the best for its shareholders by promoting a new committee in charge of a companywide transformation.

A few months later, Cohen became GameStop's chairman and made several changes to the company's board of directors — including a change of CEO — and appointed several employees from e-commerce benchmarks such as Amazon  (AMZN) - Get Free Report and Chewy.

Since Ryan Cohen bought his stake in GameStop, even with an overvaluation of more than 1,500% of his initial investment, he has not sold a single share.

More recently, Ryan Cohen purchased another meme stock, home-goods retailer Bed Bath & Beyond  (BBBY) - Get Free Report. Like GameStop, the company has focused on its brick-and-mortar stores and suffers from strong competition from e-commerce.

And, according to Cohen, it also suffers from weak management.

Earlier this year, Cohen bought nearly 10% of the company's shares and proposed to Bed Bath & Beyond's board a series of changes and initiatives to recover its business, including the privatization of the company.

A few months later, former Bed Bath & Beyond CEO Mark Tritton — whom Cohen criticized — was removed from the leadership position. Also, Cohen appointed three directors to join Bed Bath & Beyond's executive board.

Between July and August 2022, Bed Bath & Beyond became the subject of a new meme-stock rally. The stock jumped about 400% in a few weeks.

Cohen saw the opportunity and decided to finally sell all of his BBBY stock, between August 15 and 16, making an estimated profit of $68 million.

Cohen by Day, Icahn by Night?

Ryan Cohen is a mysterious figure in the financial market. He doesn't give interviews and expresses himself on his Twitter  (TWTR) - Get Free Report account with memes and cryptic messages.

Meme stock investors love it. Every time Cohen tweets something, there is a big repercussion in social media. Many times, it has had a direct impact on the share price of stocks such as GameStop and Bed Bath & Beyond.

Cohen's last tweet was a photo taken with Carl Icahn. This led retail investors who support GameStop's stock to speculate on some new developments in the activist investor saga.

Ryan Cohen himself already commented on this theme when he tweeted in August, "Ryan Cohen by day, Warren Icahn by night":

Ryan Cohen's admiration for Carl Icahn's philosophy and the comparison between the two is nothing new. However, Cohen also made a mention of Warren Buffett, perhaps indicating that he also sees himself as a value investor buying "cigar butt" companies with a high potential for appreciation in the long term.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• B. Riley analyst Eric Wold is neutral on AMC Entertainment.

• Despite recently lowering his price target for AMC, Wold suggests that the stock has a potential upside of about 15%.

• According to Wold, investors shouldn't worry about the weak theatrical release schedule for the third quarter.

Read more from Wall Street Memes: GameStop's Transfer Agent, Computershare, Have Been Doing Well Amid Market Turmoil

B Riley: AMC Shares Are Still Undervalued

B. Riley analyst Eric Wold is one of the few Wall Street analysts who is not bearish on AMC Entertainment  (AMC) - Get Free Report.

However, recently, while maintaining his neutral position on the movie theater stock, Wold lowered his price target for AMC from $11 per share to $7.50. Considering AMC's share price at the time of writing, Wold's price target implies a potential upside of nearly 15% from current levels.

According to the analyst, he lowered his price target on AMC due to "continued uncertainties" regarding movie production delays and the timing of film releases.

Also, according to Wold's projections, AMC should see box-office revenues in 2022 and 2023 that are about 30% and 16% below pre-pandemic 2019 levels. That would equate to roughly $7.9 billion and $9.5 billion, respectively.

Going into more financial detail, Wold also lowered his third-quarter revenue estimate from $1.09 billion to $978 million. In a note to clients, he wrote that he expects AMC to report earnings-per-share (EPS) losses of 31 cents and 10 cents for the third and fourth quarters, respectively. For full-year 2022, the analyst expects a loss per share of 17 cents.

Read more from Wall Street Memes: Citadel's Ken Griffin: Meme Stock Losses Are Healthy for the Economy

Why AMC's Future Holds Potential

In late August, B. Riley's Eric Wold wrote that AMC and other movie theater chains are well positioned to ride out the third quarter's weak film slate and that investors have no reason to be "incrementally concerned."

At the time, the analyst wrote that the fourth quarter of this year — along with next year — should have a solid roster of film releases.

Specifically, the B. Riley analyst believes that AMC Preferred Equity (APE) units provide investors with an opportunity to access significant additional capital.

Wold also commented on Cineworld's filing for Chapter 11 bankruptcy protection. He wrote that, even if the company's main focus is on restructuring its balance sheet, it's possible that Cineworld may also divest some of its assets.

Because AMC already has a presence in Europe, it could be a potential buyer. Wold wrote that he can envision AMC "maneuvering" around restrictions on participating in the European market through lease acquisitions.

The Bottom Line

AMC could have been in the same undesirable situation as Cineworld if it weren't for its loyal retail investors. Thanks to their help, the company was able to raise a significant amount of cash to recover its business from the COVID crisis and to pursue different goals than simply struggling to survive.

Even though box office revenues are still far from pre-pandemic levels, CEO Adam Aron has led initiatives to inject capital into the company, including the creation of AMC Preferred Equity (APE) units. This will help AMC get through challenges for the cinema industry, such as quarters with weak film release schedules.

While there is still a lot of bearishness surrounding AMC due to the fact that the company trades in a speculative manner, the stock's current share price indicates that the company is trading more in line with its fundamentals than it has since the beginning of meme-stock mania.

For example, AMC's price to sales — a useful metric for comparing stocks with negative earnings — stands at 0.8, versus an entertainment industry average of 2.1. This may be an indication that AMC is indeed undervalued.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Computershare  (CMSQY) and  (CMSQF)  is the world's leading provider of issuer services.

• Computershare acts as the transfer agent for over 16,000 publicly traded companies, including GameStop  (GME) - Get Free Report. Many retail GME investors have directly registered their shares via Computershare's services.

• Rising over 10% YTD, Computershare has had a much better year than the broader market. Because the company operates within the financial services sector, it is a beneficiary of rising interest rates.

Read more from Wall Street Memes: Citadel's Ken Griffin: Meme Stock Losses Are Healthy for the Economy

What is Computershare?

Computershare is an Australian-based company that provides stock transfer, corporate trust, and employee share plan services to more than twenty countries, including the United States.

As a stock transfer agent, Computershare manages changes in or maintenance of ownership for companies’ stock or investment funds.

Fund managers may contract transfer agents such as Computershare for fund accounting, administration, and other back-office services.

Founded in 1978, Computershare now services 16,000 publicly traded companies as a global financial record keeper.

Currently, the largest portion of the company’s revenue – about 38 percent – comes from issuer services. Most of the remainder comes from mortgage services, employer share plans, and corporate trust services. Nearly 60 percent of the company's total revenues come from its US operations.

Computershare has traded publicly on the Australian Stock Exchange (ASX), under the ticker CPU, since 1994. As of this article’s writing, the company has a market cap of $9.6 billion.

Since Computershare does not trade on U.S. stock exchanges, US investors interested in buying shares need to do so via over-the-counter (OTC) markets. Shares are typically purchased in the form of American Depository Receipts, or ADRs (which are bank or brokerage-held securities that represent shares of foreign companies).

Computershare Stock Performance

CMSQY shares have performed well since bouncing off lows during the Covid market crash of early 2020. Shares have risen an impressive 78% over the last twenty-four months.

In spite of broad market turmoil, Computershare shares managed to rise nearly 10% YTD. The iShares MSCI Australia ETF  (EWA) - Get Free Report – which tracks the returns of Australian equities – has fallen 20% over the same time period.

Computershare's strong performance this year can be partially pinned on rising interest rates. The companies’ earnings are positively correlated with interest rates, and management has delivered solid results and guidance that have pleased investors.

Indeed, unlike many other publicly-traded companies, Computershare is a beneficiary of rising interest rates, since its margins are earned in cash held on behalf of its share registry customers.

According to Fairmont Equities, many investors have seen Computershare as a solid bet within a high-interest environment and have added it to their portfolios as a hedge.

Not surprisingly, the stock has a “moderate buy” consensus on Wall Street. Among the eight experts covering the stock in the last three months, six have a “buy” recommendation. The average price target for Computershare stock stands at $18.29 - that implies an upside of almost 20%, based on the current $15.60 share price.

Why do GameStop Shareholders Like Computershare?

GameStop is just one of the thousands of companies for which Computershare acts as a transfer agent. For some time now, many GME retail investors have been wary of their shares’ security.

Looking for ways to protect their shares from short sellers, many GameStop shareholders have registered their shares through the Direct Registration System (DRS).

DRS is a security registration service that provides shareholders with the option of holding their assets "on the books."

In other words, DRS is a way for investors to hold their assets without needing a brokerage firm. That means shareholders have greater autonomy over their shares.

Retail GME holders have seen this as an attractive move. When they hold their GME shares via DRS, they can limit payment for order flow and reduce the number of shares available to be loaned out to short sellers by brokerage firms.

In theory, if enough retail investors use DRS to transfer their shares to a transfer agent, share availability will decrease, making it tougher for shorts to open new short positions.

Since the direct registration movement began among GameStop shareholders, GameStop has reported, on a quarterly basis, the number of shares registered directly with its transfer agent - in this case, Computershare.

According to GameStop’s latest Form 10-Q, dated July 30, 71.3 million shares were registered directly through the DRS. That number implies nearly 30% of GameStop's float is registered directly with its transfer agent.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

Citadel is a hedge fund and financial service company. Despite 2022 being a difficult year for the markets in general, the company's flagship funds have been returning double digits and outperforming their peers.

In an interview with CNBC during the CNBC Delivering Alpha conference, Citadel CEO Ken Griffin answered several questions regarding the future of the U.S. economy, Citadel hedge funds, payment per order flow, and speculative assets.

Here's what he had to say.

(Read more from Wall Street Memes: BlackBerry (BB): Why Jim Cramer Is Warning Investors to Avoid This Stock)

Ken Griffin on the Speculative-Asset Bubble

When asked what he thinks about meme-stock mania and the rise of non-fungible tokens (NFTs) and cryptocurrencies, Ken Griffin said that the waning of these speculative assets is healthy for the economy.

And he also blamed the speculative-asset bubble on the U.S. government's response to COVID.

According to Griffin, the pandemic completely justified the massive fiscal stimulus programs. And he gave credit to the Trump administration for its initially aggressive stimulus payouts at the beginning of the pandemic.

However, he was critical of the government continuing to send out checks.

As a result, the massive amount of money given to families, which Griffin said was borrowed from the next generation, has created an increase in the federal deficit equivalent to the cost of winning World War II.

He also said that, in many cases, the money ended up in speculative assets such as NFTs, cryptocurrencies, and meme stocks.

Because this cycle has passed, Griffin now sees people spending their savings on leisure activities and items they want to have. He said that is healthy for the economy, because pouring money into speculative assets creates neither jobs nor prosperity in the long run.

The Effect of Speculative Investing Is Already Apparent

Ken Griffin said that the effect of speculative investing on the markets is already apparent. According to him, billions of dollars have been invested in companies that will fail. This amount of cash could have been used for more noble purposes, such as the treatment of Alzheimer's and Parkinson's, or the education of children.

The CEO of Citadel believes that speculation causes the capital markets to distance themselves from their purpose. He argues that, historically, the markets in the U.S. have been a machine for producing jobs and have generated innovation and improved lives.

A Word on Payment for Order Flow (PFOF)

Payment for order flow (PFOF) is a widely debated topic among retail investors. Ken Grifin's Citadel Securities is one of the largest market makers in the world and has PFOF agreements with some e-brokerages.

On the federal level, the practice of PFOF is being scrutinized in connection with Citadel Securities' role in the GameStop  (GME) - Get Free Report short-squeeze event. The Citadel hedge fund provided $2 billion to investment firm Melvin Capital, one of the leading short sellers that invested in the short squeeze in January 2021.

About 18 months ago, Citadel was pushed into a payment-for-order-flow issue with commission-free broker Robinhood  (HOOD) - Get Free Report, a platform that was used by several retail investors involved in the GameStop short-squeeze event.

Ken Griffin denied any misconduct in the event, and in November 2021, a U.S. District Court dismissed the class action suit, ruling that there's no evidence that Robinhood and Citadel had colluded.

When asked if Ken Griffin was surprised by the SEC's decision, he said he was aware that there is or was a significant chance that payment for order flow would be banned and that if it was, he would adapt.

However, Griffin said he believes he has not done enough to help his clients understand the nature of PFOF. According to the hedge fund CEO, firms such as Citadel Securities, V2, and Jane Street can price stocks very accurately, manage risk, and improve price and payouts by payment for order flow.

The Citadel Securities founder also said that PFOF has allowed large e-brokerage firms not to charge commission fees, and that many retail investors appreciate this.

Finally, Griffin said that, in the event of a PFOF ban, it may be that trading acumen will improve in the world. However, it would probably result in higher commissions being charged — something SEC Chairman Gary Gensler and the e-broker community must take into account.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

• Hedge fund Tiger Global has lost more than 52% this year. Its long-only fund is even worse, down 66% year-to-date.

• Tiger Global had a sizable stake in GameStop a few years ago. But it ended up selling its long position in GME at a loss.

(Read more from Wall Street Memes: BlackBerry (BB): Why Jim Cramer Is Warning Investors to Avoid This Stock)

Why Is Tiger Global in Deep Trouble?

This year has been terrible for hedge fund Tiger Global, which focuses on technology, software, consumer, and fintech companies.

The fund, which The Wall Street Journal has identified as one of the "largest ever," has already lost about two-thirds of its accrued value since its creation.

And year to date, the fund has fallen 52%. Because it started the year with about $35 billion under management, that means the fund has lost roughly $18 billion in 2022.

And its long-only fund has accumulated even greater losses — 66% year to date.

However, according to Bloomberg, Tiger Global's true losses could be even greater, considering its investments in private startups.

Back in 2020, Tiger Global handed its investors $10.4 billion — the highest hedge fund returns that year. Tiger Global also managed to raise $12.7 billion for a new fund to invest in fast-growing technology.

But this year's economic turmoil has hit the pause button on new funds. In the second quarter, the number of hedge fund launches was the lowest it had been since the Financial Crisis in 2008.

Tiger Global Was a GameStop Bull

A few years ago, Tiger Global placed a sizable bet on GameStop  (GME) - Get Free Report. However, its bullish position on GME was not profitable.

The fund started investing in the video game retailer back in 2014, when Tiger Global bought about 8 million GME shares at a post-stock split-adjusted value between $32 to $44 per share.

However, in the second quarter (Q2) of 2015 Tiger ended up selling 1 million shares at a median price of $41.1 per share, reducing its position by 12.5%. A year later, in Q2 2016, Tiger Global ended up selling its entire position in GameStop at a loss, with a median price of $29.27 per share.

A curious fact is that this was not the only hedge fund with the name "Tiger" that bet on GameStop in the not-so-distant past.

Hedge fund and family office Tiger Management built a stake in GameStop in 2018, even sending a letter to the company's board demanding changes to the company's strategy to regain the trust of its shareholders.

Tiger Management did not agree with GameStop's decision at the time to write off its debt instead of buying back shares, a move that showed a lack of confidence in the company's core business.

In its letter, the fund even made a threat to the company's board that it would sell its entire stake if no action was taken.

But all this was of little use. Three months after Tiger Management wrote the letter to GameStop's board, the fund ended up closing its positions in GameStop.

Another GME Bull

After negative sentiment about GameStop led other hedge funds to close their long positions in the retailer, the company caught the attention of none other than Michael "Big Short" Burry's fund, Scion Asset Management.

In 2019, Burry bought a sizable position in GameStop after considering the high short interest in the stock and realizing that its business was undervalued. Like Tiger Management, Burry sent letters to GameStop's board urging a buyback of $238 million in shares.

GameStop ended up announcing the repurchase of a large amount of stock. About a third of the company's shares were repurchased for $115.7 million.

It's believed that Burry's purchase may have initially helped GameStop attract retail investors through social media. It could also have helped it attract current GameStop Chairman Ryan Cohen. In 2020, Cohen through its holding company RC Ventures became the company's largest shareholder. And in early 2021, GameStop skyrocketed by about 2,500% in a few weeks.

However, Scion Asset Management also got out a little too early to profit from GME's huge rally.

Burry ended up selling his positions in the fourth quarter of 2020. However, he still profited: Burry sold the shares he had bought for $4 for around $4.50. 

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)

ContextLogic  (WISH) - Get Free Report was one of the most popular stocks among retail investors during the meme-stock craze of 2021. However, shares of the e-commerce company, which owns the Wish platform, have plummeted by 97% from its peak in late January 2021, shortly after it became a publicly traded company.

Despite its weak business fundamentals and difficulties in making profits, investors may want to consider buying shares of the company while it has a penny stock valuation.

(Read more from Wall Street Memes: This Hedge Fund Is Betting Hard Against GameStop Stock. Are Shorts Playing With Fire?)

First, a Little Bit of Context and Logic

Currently, ContextLogic shares are worth little more than 70 cents. That's the lowest price in the history of the stock.

Like other e-commerce players, ContextLogic was a big beneficiary of the stay-at-home trends related to the COVID crisis. However, disappointing earnings results soon showed that the company would be unable to sustain its growth in a post-pandemic scenario.

WISH was worth $30 per share in January 2021. But since then, WISH shares have lost 97% due to lost customers, poor margins, and two changes of the company's CEO in the last two years.

Why Is WISH So Cheap?

Wish became prominent in the e-commerce market because of its "cheap" products. The virtual retailer, which imports the vast majority of its goods from China, was able to offer prices far lower than Amazon  (AMZN) - Get Free Report and other competitors.

However, customers started to complain about the quality of Wish's products and the time it takes to receive goods. Competing Chinese platforms like Alibaba's  (BABA) - Get Free Report AliExpress, and Pinduoduo's  (PDD) - Get Free Report Temu also work with similar-quality products. However, their superior logistics infrastructure and quality control have stolen a large portion of Wish's customers.

Now, when looking at ContextLogic's trajectory since its initial public offering (IPO) in December 2020, one can conclude that it's cheap. After all, it currently costs less than $1 per share.

However, there are good reasons for this cheap share price.

Regrettably, nearly all of the company's revenue generation and profitability metrics have gotten worse. And it hasn't helped that the macroeconomic scenario is especially unfavorable for companies with no earnings history, either.

Wish's sales have been declining quarter by quarter for the last two years. Last quarter (Q2), sales dropped 80% year over year. And for the last 12 trailing months, the company posted net losses of $272 million.

But ContextLogic is not all bad. Even with all the difficulties and burning through $361 million in operating expenses last year, the company has almost $1 billion in cash and virtually zero debt.

The company also has some valuation metrics that aren't bad, either. The company's price-to-book ratio is 0.8 ,versus a retail industry average of 4.7. And ContextLogic's enterprise-value-to-EBITDA ratio is 1.5, versus an industry average of 24.3.

The metrics indicate that WISH may be quite undervalued.

Should You Buy the Dip in WISH?

There is certainly a lot of risk in ContextLogic's stock, from the macro backdrop to the company's governance problems. The recent and early departure of former CEO Vijay Talwar in late September after only seven months on the job certainly raises a yellow flag.

However, looking at the company's balance sheet and considering its cash positions and debt, the company is for the time being not a bankruptcy risk — which is excellent news for a penny stock.

But the company has work to do. Its operational risk is the most worrying, because the Wish platform continues to lose users, record revenue losses, and struggle to address serious problems in consumer experience and delivery times.

The level of investor confidence in the quality of Wish's products and its ability to provide a positive customer experience is currently super low.

On the other hand, WISH has already been severely punished. A further significant downside risk is unlikely.

Considering that the company has a market cap of nearly half the amount of cash it owns, Wish is cheap. The big question is whether — with a recession likely ahead — the stock could get even cheaper.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• Moody's has downgraded home-goods retailer Bed Bath & Beyond's debt to the lowest possible rating.

• The company still hopes that its new management's turnaround plan will save it from bankruptcy.

• Bed Bath & Beyond still has options for saving its business, but has it waited too late?

(Read more from Wall Street Memes: BlackBerry (BB): Why Jim Cramer Is Warning Investors to Avoid This Stock)

Why Did Moody's Downgrade Bed Bath & Beyond?

Bed Bath & Beyond  (BBBY) - Get Free Report has been hit with more bad news: Moody's bond credit rating service has downgraded the company's debt from Caa3 to C, which is the lowest possible rating.

In other words, Moody's thinks there is a high probability that Bed Bath & Beyond will default on its debt in the next year.

Currently, Bed Bath & Beyond's total debt is $3.53 billion. About 90% of the company's enterprise value is made up of debt, although its debt is relatively low cost (about 2%).

However, for some time now, Bed Bath & Beyond's business has been showing signs of weakness leveraged further by management errors.

In the past year, the company has been trying to strengthen its business by using a turnaround plan introduced by former CEO Mark Tritton.

According to Tritton, the plan's purpose was to revamp the company's core business and optimize its operational efficiency. But the financial plan also included prioritizing share buybacks, rather than paying down some portion of its long-term debt.

The turnaround has shown little success. And in the meantime, supply-chain issues, inventory imbalances, and troubles with cost structure have compounded.

Bed Bath & Beyond now has only $135 million in cash and cash equivalents. This is alarming because the company is struggling to pay its obligations.

However, Bed Bath & Beyond is still able to pay its obligations in the short term. Considering its cash ratio of 0.1, the company can pay short-term liabilities out of its highly liquid assets. That's because Bed Bath & Beyond has total assets of $4.66 billion, of which $1.9 billion can be converted into cash in less than a year.

How Can Bed Bath & Beyond Be Saved?

Bed Bath & Beyond executives have been executing a new turnaround plan that has involved closing 150 stores, laying off 20% of its staff, implementing a new stock offering plan, and raising cash over $500 million through debt.

However, according to Goldman Sachs analyst Kate McShane, Bed Bath & Beyond simply needs to bring its customers back into its stores for a sustainable turnaround. Morgan Stanley analyst Jason Haas sees the need for a drastic change in cash burn and a source of liquidity as more important to the company at the moment than any debt restructuring.

Even though its second-quarter results were in line with expectations, Bed Bath & Beyond's weak balance sheet forces the company to increasingly need to raise cash in 2023.

However, Bed Bath & Beyond still has one card up its sleeve: its Buybuy Baby banner. The subsidiary is one of Bed Bath's best assets and a sales standout. The performance and potential of Buybuy Baby were among the main reasons that activist investor Ryan Cohen bought a big chunk of BBBY shares earlier this year.

One of Cohen's demands to the Bed Bath & Beyond board was the spin-off of Buybuy Baby, which he said had a valuation of billions of dollars and would be more valuable than all of Bed Bath & Beyond combined.

"In the event Bed Bath pursued a full or partial sale of Baby, it could position itself to pay off debt, put cash on the balance sheet and continue reducing its share count, thereby creating significant value for shareholders. Spinning off shares of Baby would be an even more efficient way to transfer value to shareholders," Cohen wrote.

But Bed Bath & Beyond's management has announced it has no interest in selling Buybuy Baby for the time being and will focus on initiatives to increase sales.

During the last earnings call, when asked about a possible sale, CEO Sue Gove responded by saying that she knows there are interested parties and that "the business is a very attractive business, and we're not alone in appreciating its value."

The Bottom Line

The way things are going, sooner or later, Bed Bath & Beyond will be forced to raise whatever it can for the sake of its survival. Most likely, that will involve selling Buybuy Baby.

The home goods retailer has also announced the potential launch of an at-the-market offering program for up to 12 million shares of common stock — which would dilute its stock float.

In summary, Bed Bath & Beyond is facing its biggest challenges ever. But there are still options on the table that could allow it to survive for some time.

The big question is whether the company will have acted too late. BBBY shares reached as high as $23 per share in mid-August and management missed the chance to raise a sizable amount of cash to strengthen the company's liquidity straight away.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)

• MadMoney host Jim Cramer has recommended that investors avoid BlackBerry stock.

• BlackBerry has been losing money and has been heavily influenced by meme investor speculation, according to Cramer.

• Shares of the cybersecurity company are down more than 60% this year alone, and Cramer is not the only one on Wall Street who is bearish on the stock.

(Read more from Wall Street Memes: This Hedge Fund Is Betting Hard Against GameStop Stock. Are Shorts Playing With Fire?)

Why Jim Cramer Doesn't Like BlackBerry

During a recent episode of his MadMoney program on CNBC, Jim Cramer answered a question from a BlackBerry  (BB) - Get Free Report investor who said she bought the stock a year ago looking for a long-term opportunity. The investor said she considered the cybersecurity company's partnerships with companies like Amazon  (AMZN) - Get Free Report and BlackBerry's involvement with electric vehicles.

However, according to Jim Cramer, BlackBerry is in a bad position to be losing money. The MadMoney host also added that one of the reasons he doesn't like the stock is because of its meme status.

"They're losing money, the ‘memesters’ are against me on this. They hate me, and you know what? I kind of really like that. So I say we avoid BlackBerry," Cramer said during the show.

What's Wrong With BlackBerry?

Nearly two years ago, BlackBerry stock was highly influenced by "meme mania." Shares of the company reached as high as $20 per share.

But today, BB is valued at less than $5.

In the early 2000s, BlackBerry was a pioneering smartphone company. But now it has moved away from making phones, sold its patents, and shifted its focus to cybersecurity and software.

This transformation has resulted in years of negative revenue for BlackBerry. With top-line sales shrinking, BB has depreciated by nearly 90% from its peak in 2008.

Many investors who believe in the potential of cybersecurity saw opportunity in BlackBerry and led to its being priced as a growth stock. However, these BB bulls have found themselves in a so-called "value trap."

BlackBerry continues to consistently lose money from its operations. It has about $530 million in debt, $699 million in cash, and a negative operating cash flow of $76 million for the last 12 trailing months.

High inflation and rising interest rates — both of which are particularly bad for unprofitable companies — have also contributed to BlackBerry's stock loss.

Cramer is not the lone BlackBerry bear on Wall Street. Among the four analysts covering BlackBerry over the past three months, none are bullish on the company's current situation.

The latest mixed earnings results — which included an 8% year-over-year drop in cybersecurity revenue — frustrated Wall Street analysts, forcing them to cut their price targets on BB.

BlackBerry holds a neutral consensus among experts. However, the median price target for the stock is $5.44 — which would be an upside of more than 20% from current levels.

Is Jim Cramer Wrong About BlackBerry?

Jim Cramer has become a "persona non grata" among the social media community of investors who bet on meme stocks.

In fact, many investors have started to adopt an "inverse Cramer" philosophy, by which they do the opposite of what the CNBC host recommends.

Tuttle Capital Management has even filed with the U.S. Securities and Exchange Commission (SEC) its plans to launch a new exchange-traded fund (ETF) that would perform inversely to Cramer's recommendations.

In addition to the Inverse Cramer ETF (SJIM), Tuttle is also making a Long Cramer ETF (LJIM) for those who wish to follow Cramer's recommendations to the letter.

The same firm has also launched an ETF to bet against the stock picks of investor Cathie Wood, who has lost 63% this year alone in her technology fund, Ark Innovation ETF  (ARKK) - Get Free Report.

Following the SEC filling for the Inverse Cramer ETF, Cramer responded via Twitter  (TWTR) - Get Free Report that investors are welcome to bet against him:

"As always I welcome people betting against me. I have done this for 42 years. Those who know me know that you would have been betting against Apple at $5, Google since inception, Meta at $18, Amazon at $10, Nvidia at $25, and AMD at $5. I welcome all comers.”

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• Short sellers continue to target AMC and APE shares due to a long list of both macro and micro headwinds.

• An unusually high number of failures to deliver in AMC could be due to naked short selling.

• Despite AMC's and APE's poor stock performance this quarter, there's a good chance we'll see another short squeeze.

Read more from Wall Street Memes: This Hedge Fund Is Betting Hard Against GameStop Stock. Are Shorts Playing With Fire?

Why Are Short Sellers Targeting AMC and APE?

Short sellers continue to build positions in AMC Entertainment  (AMC) - Get Free Report and AMC Preferred Equity (APE). According to the latest data from Morningstar, roughly 100 million shares of AMC were being sold short in mid-September.

That's nearly 20% of the company's stock float and significantly higher than the number of shares being shorted in mid-August (89.1 million).

And about 44 million shares of APE are being shorted. That's about 5.4% of its float.

There are several probably causes for this increase in short activity:

• Rising interest rates and less favorable unemployment data are affecting the markets. Naturally, these effects have spilled over into AMC.

• The U.S. Securities and Exchange Commission (SEC) has chosen not to ban payment for order flow (PFOF), which means brokers like Robinhood (HOOD) can make extra gains by routing market makers' trades. AMC retail shareholders are very critical of PFOF.

• AMC rival Cineworld, the world's second-largest movie theater circuit, has filed for Chapter 11 bankruptcy protection.

• The third quarter tends to be relatively weak when it comes to new releases in movie theaters.

• Investors are concerned about the potential sale of 425 million APE units, which could result in share dilution and a lower stock price.

• Wall Street analysts have rated AMC as a "sell" because of its "upside down" capital structure — there has been a substantially larger number of outstanding shares since the start of the pandemic.

Failure to Deliver Data Still Oddly High

Failure to deliver (FTD) in trading is when one of the parties in a transaction fails to fulfill its obligations by the settlement date. It often means that the short seller doesn't actually hold the underlying asset that they're shorting. Known as "naked short selling," this practice has been illegal since 2008.

The most recent AMC FTD data made available by the SEC shows that, in the first half of September, in three consecutive trading sessions, the number of failures to deliver went from 1.3 million to over 2.1 million. That corresponds to more than $12 million in share value.

There has also been a significant amount of FTD activity involving APE shares. In September, there were more than 1 million FTDs on four consecutive days.

For comparison, Tesla  (TSLA) - Get Free Report, which also has a lot of short activity, had a high of only 131,704 daily FTDs during the same period.

When the number of FTDs exceed 1 million, there's a probability that the share prices of the involved securities will rise after a 35-day period.

That's because the SEC grants short sellers 35 calendar days after the settlement day to close the position by buying the non-delivered securities.

The Bottom Line

AMC shares have fallen more than 34% since the end of August, and APE units are down an incredible 66% in the same period.

However, AMC still has a big fan base made up almost entirely of retail investors. This, coupled with the fact that AMC has managed to start trading in line with its business fundamentals (unlike most other meme stocks), makes the stock a danger to short sellers. There's imminent risk of a short squeeze — as AMC itself mentioned in a recent Form 10-K filing.

Even though AMC shareholders have been contending with a lot of volatility, it's still risky to bet against the stock. After all, any small catalyst for AMC could trigger a short squeeze.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• President Biden made an announcement saying he will pardon federal marijuana offenses in the U.S.

• Cannabis stocks liked the news, with many trading up double-digits during the October 6th market session. AdvisorShares Pure Cannabis ETF  (YOLO) - Get Free Report jumped nearly 35% in a single trading session.

• Even though President Biden's announcement is not a game-changer for cannabis yet, hopes for legalization in the not-so-distant future have been renewed.

(Read more from Wall Street Memes: 3 Stocks With Short Squeeze Potential in October)

President Biden Pardons Pot Offenders

October 6th was a historic day for the cannabis community. President Joe Biden made an announcement saying that he will pardon thousands of people for federal marijuana offenses. He also proposed an overhaul of federal drug policy. The President stated that marijuana’s classification within federal law does not make the slightest sense.

"There are thousands of people who have prior federal convictions for marijuana possession, who may be denied employment, housing, or educational opportunities as a result. My action will help relieve the collateral consequences arising from these convictions."

Biden said at the beginning of his term that he would seek the decriminalization of marijuana. However, the latest news from The White House suggests that President Joe Biden will not make any pro-legalization moves ahead of the midterm elections.

Cannabis stocks going up … and back down

As expected, the news was very well received in the cannabis community. Retail darlings stocks such as SNDL Growers  (SNDL) - Get Free Report and Tilray  (TLRY) - Get Free Report rose 23% and 37% respectively. Tilray’s bullish performance came one day before reporting their first-quarter earnings for fiscal 2023.

Canopy Growth  (CGC) - Get Free Report, meanwhile, was up 23%. That company's vice president, David Culver, commented on President Biden's announcement. Culver said that, by fulfilling his campaign pledges, Biden is making the right decision to heal the harms of the past and chart a responsible course for legalized cannabis markets in the future.

But the euphoria didn't last long. During the next day’s trading session, a selloff came in full force. SNDL fell almost 17%, Canopy fell 23%, and Tilray fell 16%. Many investors seemed to see the previous day's appreciation as an opportunity to lighten some of their deeply-red positions.

Plus, even though President Biden's announcement is bullish about developments in cannabis legalization at the federal level, there is still a long road ahead.

Biden's review through The United States Department of Health (HHS) and the Department of Justice (DOJ) will not necessarily result in the descheduling of cannabis. It may just move marijuana into a lower category under the Controlled Substances Act.

A bill that decriminalized marijuana - the Marijuana Opportunity Reinvestment and Expungement (MORE) Act - was passed in April of this year by the US House of Representatives for the second time. However, the MORE Act stalled out in the Senate.

Another bill determining the future of cannabis companies is the SAFE Banking Act, which would fling the gates wide open for large firms to invest in the cannabis space. Currently, US institutional investors cannot invest in stocks such as Tilray, SNDL, and Canopy Growth.

The good news for pot stocks is that the probability that federal legalization and other bills will become law is much higher under the current government administration than under previous ones.

Federal legalization would be a game changer for cannabis companies in general. However, as I have already written in some previous articles, considering their successful track record in the Canadian and European markets, I see Tilray as one step ahead of its competitors in becoming the biggest beneficiary of eventual US legalization.

Don't Inverse Cramer This Time

CNBC Mad Money host Jim Cramer is seen by many social media-oriented retail investors as a sort of pariah. Retail investors on social media often joke about inverting Cramer's investment recommendations, but now it has become a reality for a fund manager.

Tuttle Capital Management has filed a prospectus to create an ETF that will bet against stock recommendations made by Jim Cramer via its "Inverse Cramer ETF."

However, those who would have shrugged off Cramer's latest take on Tilray may have missed a good opportunity.

On Mad Money, in anticipation of Tilray's earnings, Cramer commented on the idea of buying TLRY shares as a sport of speculative bet during President Biden's administration.

Cramer also predicted that Tilray would also issue a bold statement on legalization, which did not occur; the real news came directly from President Biden. After a rollercoaster couple of days, the short-term impact on pot stocks remains to be seen, but Biden’s news certainly puts the industry on a more long-term bullish footing than it has seen in a while.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• Bireme Capital is one of the several brave hedge funds that have short positions in GameStop  (GME) - Get Free Report.

• Based on business fundamentals, GameStop is an obvious short case, according to the fund.

• Even with broad market bearishness, GameStop stock has overperformed the S&P 500 during some significant stretches this year, most recently between July and August.

• Considering GameStop’s trading activity, does a strict fundamentalist viewpoint offer a full picture of the stock?

(Read more from Wall Street Memes: 3 Stocks With Short Squeeze Potential in October)

Bireme Capital’s short thesis

Bireme Capital is a hedge fund that describes its strategy as incorporating a mix of both qualitative and quantitative investing styles. Its Fundamental Value fund, with a long-term short bias, outperformed the market in Q2, returning -1.4% versus -16.1% for the S&P 500.

The hedge fund provided detailed insights regarding its short positions at the end of August. According to Bireme Capital, in the first half of 2022, many investors failed to learn the many lessons of the bull market of the last decade and came to believe that "stocks only go up." They noted that "sexy stories'' had become more important than profitability. Now, the story is different.

Bireme Capital finds it hard to believe that the market has bottomed when some highly speculative securities - GameStop, AMC Entertainment  (AMC) - Get Free Report, and MicroStrategy  (MSTR) - Get Free Report among them - are still trading at irrational prices. Their fund's short book is full of these retail-favorite names.

However, in its report, the fund points out that, "amazingly," GameStop is one of the only short positions that has not yet fallen in 2022. The fact that the video game retailer is trading at a market cap far above its pre-pandemic peak, despite its revenues being 30% below their peak, has left the fund managers perplexed.

Bireme Capital points out that GameStop has also generated negative free cash flow of $700 million over the last four quarters. Wall Street estimates have been downwardly revised in 2022, reinforcing the bear thesis.

Finally, the hedge fund sees GameStop as an example of a meme stock company making its way into a new business model by using the popularity of its stock to drive new business paths. However, it is bearish on the company's execution of that plan; in fact, it believes that GameStop will never again see a quarterly GAAP profit.

GME’s recent performance

GameStop stock has outperformed the broader market on several occasions this year. Through mid-August, when Bireme Capital reported its second-quarter report, GME had accumulated gains of more than 10% versus 10% losses for the S&P 500  (SPY) - Get Free Report.

Events such as the GME stock split and the August meme rally, the latter being spearheaded by Bed Bath & Beyond  (BBBY) - Get Free Report, were key catalysts that drove GameStop higher even during periods of broad market bearishness.

However, since mid-August, GME shares have fallen more than 30%. This was not necessarily due to any company-specific factors. Rather, a macro scenario hampered by rising interest rates has triggered declines in speculative assets.

During the initial meme frenzy of 2021, GameStop registered a rare negative beta. That meant shares moved in the opposite direction of the broader market.

But since the end of last year, GME has registered a beta of 2.5. So, when the market has gone up or down, GameStop shares have tended to move at least twice as far in the same direction.

Are shorts still playing with fire?

Undoubtedly, from a fundamentalist point of view, short sellers have several good reasons to short GameStop. But is a fundamentalist perspective useful for pricing a stock that trades on different factors altogether?

Ideally, any view of GameStop should not underestimate the ability of retail investors to support high price levels for an extended period. Considering fundamentals without considerating the popularity of GME among retail investors tells an incomplete story, in our view.

To repeat what we have already said in several articles on GameStop, short sellers play with fire by shorting GameStop. And they know it. Currently, GameStop is still experiencing very high levels of short interest. Eighteen and a half percent of the float – about 49.53 million shares – are shorted.

In addition, there are 71.3 million GameStop shares directly registered with a transfer agent, which keeps those shares out of the possession of brokers and makes them unavailable to be lent to short sellers. This means that roughly 30% of GameStop's float is held by retail investors who are taking a “diamond hands” approach to their GME investment.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• Michael “Big Short” Burry has been predicting for a long time that one of the biggest financial crises in history is coming.

• According to the manager of Scion Asset Management, there is a surplus of U.S.-listed companies with gigantic market caps and unimpressive or even negative earnings.

• Trading data suggests that retail investors have gotten more into short selling recently.

Read more from Wall Street Memes: Tilray Stock (TLRY): Jim Cramer Likes It During The Biden Administration

A full menu for short sellers

Michael Burry is known for being one of the first investors in the market to predict and profit from the subprime mortgage crisis in 2008. This time, again predicting a catastrophe in the American economy, the Scion Asset Management manager spoke about an alarming number of overvalued stocks.

Burry’s exasperation is clear in this tweet from September:

"This morning there were still 218 primary stock listings in the United States with a market cap over $1 billion and EBITDA less than NEGATIVE $100 million. 29 of them have bad market caps over $10 billion, totaling $655 billion. Saying it again. ALL the silliness must go."

Taking into account Burry’s criteria for sorting out “silly” companies, we’ve generated our own list considering the most recent trailling twelve months. It includes plenty of big names, such as JD.com  (JD) - Get Free Report, Boeing  (BA) - Get Free Report, Atlassian Corp  (TEAM) - Get Free Report, Snowflake  (SNOW) - Get Free Report, and Uber  (UBER) - Get Free Report.

Note that the vast majority of these companies listed above have already suffered sizable losses throughout this year.

E-commerce stocks such as Shopify  (SHOP) - Get Free Report and Sea  (SE) - Get Free Report (the latter operates Shopee) saw YTD declines of 77% and 72%, respectively. They’ve been heavily impacted by inflation and rising costs, which have forced many consumers to cut their discretionary spending.

Electric vehicle makers Rivian  (RIVN) - Get Free Report, Lucid  (LCID) - Get Free Report, and Nio  (NIO) - Get Free Report also fell 64%, 60%, and 49% respectively. Rising interest rates have impacted stocks with severely stretched valuation multiples and negative EBITDA, putting their growth capabilities in check.

However, it’s important to note that negative earnings are not always an automatic “sell” signal for a stock. Often, negative earnings are caused by temporary factors or by expenditures meant to enhance future earnings (the latter being very common with tech companies).

Michael Burry’s bear thesis

According to Burry, the current market silliness is a result of the S&P 500 rebounding too early and making unsustainable gains after the COVID crash in 2020.

Burry also says that the current economic situation could lead to a stock market crisis worse than any seen in recent history. Since the market crashed in 2020 with COVID, a mix of lockdowns, meme stocks, crypto leverage, and rampant inflation have convinced Burry that markets are in for a chaotic future.

Burry also adds the recent spikes in the S&P 500  (SPY) - Get Free Report - which were caused by investors' hopes that inflation has finally peaked - are misleading.

He says that inflation has always been "peaky" and has never had a single peak. Thus, he believes that investors should not be fooled by periods of mild deflation because inflationary cycles usually last for years, while inflationary eras can last for decades.

Recently, Burry sold all but one stock in Scion Asset Management's stock portfolio: GEO Group  (GEO) - Get Free Report. Among his sales, Burry unloaded his positions in megacaps including Alphabet  (GOOGL) - Get Free Report, Meta Platforms  (META) - Get Free Report, and Bristol-Myers Squibb  (BMY) - Get Free Report.

Are retail investors getting more into shorting?

According to a recent Bloomberg article, retail investors are shorting more heavily than they have in the past. Data from trading platforms such as eToro, for example, show that retailing short selling activity in 2022 grew 61% compared to 2021 and 41% compared to 2020.

Although shorting is a riskier strategy, due to the possibility of unlimited losses, macroeconomic circumstances have left many feeling uncertain about the market’s future.

This change in retail activity is significant, especially in light of the meme stock rallies of 2021, which were predicated on retail investors betting against short sellers. 

* Data from Stock Rover based on trailing twelve months.

** Table updated on October 10 at 1:15 pm EST.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• Tilray will report Q1 FY2023 earnings and Mad Money's Jim Cramer looks at whether owning the stock during President Joe Biden's administration is a smart move.

• With the future of the business riding on federal legalization, Tilray  (TLRY) - Get Free Report and other cannabis stocks have had a hard time lately. TLRY has been down 60% year-to-date while the AdvisorShares Pure Cannabis ETF  (YOLO) - Get Free Report has dipped 67%.

Cramer's Take on Tilray

During his Mad Money show, Jim Cramer highlighted Tilray's first-quarter FY2023 earnings scheduled for Friday, October 7. The Canadian cannabis company is expected to report a loss per share of $0.07 and revenues of $157.4 million – a drop of about 6% YoY.

Cramer expects the company to make a bold statement regarding the legalization of cannabis on earnings day. That being the case, he ponders whether Tilray would be a speculative stock worth holding not only now, but throughout Biden's administration.

The US President said, at the beginning of his term, that he would seek the decriminalization of marijuana. However, the latest news from The White House suggests that President Joe Biden will not make any pro-legalization moves ahead of the midterm elections.

In September, Biden’s press secretary declared that he has nothing new to report in the coming weeks.

Tilray: a bit of context

Tilray is the market leader in Canada, where cannabis use is already legalized. The company also owns well-positioned brands in the U.S., such as SweetWater Brewing Co, Breckenridge Distillery, and Manitoba Harvest.

In addition, Tilray partially acquired MedMen, a company that has high penetration in the retail cannabis market in the US. According to Tilray's CEO Irwin Simon, MedMen will be key for Tilray to become the market leader in the US when legalization occurs.

What Federal Legalization Could Mean For Tilray

Legalization would be a game changer not only for Tilray but for cannabis companies in general. With Democratic control in the Senate, hopes that legalization would finally take place have been high since last year.

However, despite a theoretically more favorable political landscape, getting a meaningful cannabis bill passed into law has been quite a challenge.

In early April of this year, the US House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, a bill that would decriminalize marijuana. This was the second time that the bill passed the House. The first time, in 2020, the MORE Act stalled out in the Senate.

The SAFE Banking Act, which would allow institutions to invest in Tilray and other cannabis stocks, has also not become law yet. The bill would fling the gates wide open for large firms to invest in the cannabis space.

To keep the company growing, the SAFE Banking Act is seen as critical by Tilray executives, since the company needs funds to cover its acquisitions and pay down debt.

Should You Consider Owning TLRY?

The good news is that, even though government regulation has evolved very slowly in recent years under President Biden's administration, federal legalization of cannabis is more likely to occur soon than under previous administrations.

If legalization is indeed on the horizon, Tilray stands to be a major beneficiary. In addition to its dominance in the Canadian market, the company’s recent acquisitions and its track record at executing well in Canada and Europe suggest that Tilray could leap ahead of its competitors globally.

Dip buyers might be tempted to place a bet here. Should TLRY ever return to its current 52-week high, the upside potential from here is a whopping 340%. Even if the climb takes five years, for example, the annual returns in this case would be a respectable 35%.

That said, there is considerable risk to owning Tilray. As the company itself points out, the business is dependent on regulatory approvals, licenses, and timely renewals. Unfavorable changes in commercial legalization may impact Tilray's ability to conduct business and expand.

There are other risks that should not be ignored. Tilray holds 6.2 million outstanding warrants worth $4.76 that will not expire until 2025. This could cause significant dilution for shareholders.

Moreover, regulatory risks, taxes, and stiff competition from other Canadian LPs (such as Canopy Growth Corp  (CGC) - Get Free Report) and well-established American MSOs (such as Green Thumb, Curaleaf, Verano, and more) could dampen the company's prospects.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• Food delivery company Blue Apron has experienced extreme volatility this year, making it a potential short-squeeze target.

• American Virtual Cloud Technologies recently announced a 15-for-1 reverse stock split in order to keep from being delisted.

• Retail investors are more bullish on LiveWire than analysts, who think the electric motorcycle company has little potential.

1. Blue Apron

Blue Apron Holdings  (APRN) - Get Free Report is a New York-based company that delivers original recipes and ingredients to consumers. Blue Apron also operates an e-commerce platform that sells pantry items, kitchenware, and related products.

Shares of Blue Apron have taken investors for a wild ride this year. In January, Citron Research issued a super-bullish rating on Blue Apron, pointing out that the company could quadruple its share price over the year.

Citron's bullish thesis was based on the company's solid fundamentals, along with rising food costs due to inflation.

"Blue Apron is going to prove to be one of the greatest corporate turnaround stories of this century!" analysts at Citron Research wrote.

However, this is not exactly what happened. Within the last 52 weeks, the stock has ranged between lows of $2.27 per share and highs of $12.76. The last rally occurred between August and September, when shares of Blue Apron increased 145%.

Market skepticism about Blue Apron has caused short interest to comprise 28% of its stock float — a level that is considered very high.

And in early October, APRN shares plummeted more than 40% in a single trading session after the company announced the sale of up to $15 million worth of its common shares.

Even though dilution should have a bearish effect on the company's share price, Blue Apron is looking to increase the company's funds without having to issue more debt.

Considering that Blue Apron is already on the radar of traders and retail investors who see it as a potential short-squeeze play, the high percentage of short interest may cause some strong bullish moves in the short term.

2. American Virtual Cloud Technology

American Virtual Cloud Technologies  (AVCT) - Get Free Report is an Atlanta-based company with a market cap of $20 million. It provides IT solutions such as data centers, enterprise network solutions, cybersecurity, etc.

The company has been in free fall this year. Its stock is already down over 93% year to date, which is not surprising, considering that AVCT has an earnings yield of -1,332%.

Currently, AVCT is a penny stock. Recently, the company announced a 15-for-1 reverse stock split to keep its share price above $1 in order to avoid delisting. But despite its poor performance, about only 12% of its float is shorted, which is not particularly very high.

However, the stock is quite popular among retail investors on social media platforms as a meme stock and a potential short-squeeze play. Reddit-using investors think that AVCT could make an interesting trade, given its high volatility.

Also, there's the possibility that the partnership between its Kandy cloud computing business and Emirati telecom provider Etisalat could lead to higher earnings for AVCT.

3. LiveWire

LiveWire  (LVWR)  is the electric motorcycle spinoff of the iconic Harley Davidson  (HOG) - Get Free Report brand. The company was recently listed on the New York Stock Exchange on September 27 through a special purpose acquisition company (SPAC) merger. Currently, it has a market cap of about $1.9 billion.

LiveWire is the first publicly traded electric motorcycle company, yet it is likely to face strong selling pressure. Most experts think the company has little chance of standing out among EV makers, especially with Tesla  (TSLA) - Get Free Report reigning supreme in this market.

However, LiveWire has caught the attention of retail investors and short-squeeze hunters due to its high volatility and modest float. Currently, the company has a float of 900,000 shares, plus 2.5 million shares that are tied up with LiveWire's SPAC sponsor John Garcia* in a one-year lockup period.

Currently, there are 120,000 shares of LVWR being shorted, indicating that eventual buying pressure could trigger a short squeeze soon.

Investors are inspired by stocks like Inspirato  (ISPO)  and Getty Images  (GETY) , which have shot up triple digits after SPAC mergers, as examples of successful short squeezes.

* Updated on October 11 at 12:10 pm EST.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

• The S&P 500, the Dow, and the Nasdaq have recently had the biggest single-day spikes since the summer of this year.

• Michael Burry, who made a fortune by making big bets against the housing market, has tweeted that he feels greedy due to the latest stock market events.

• However, Burry wrote that he feels the same way he did when the dot-com bubble was about to burst — and he was on the wrong side of the trade.

Why Is the Stock Market Rallying?

The fourth quarter started on an exciting note for the markets. The three major U.S. stock indexes — the Dow  (^DJI) , the S&P 500  (SPY) - Get Free Report, and the Nasdaq  (QQQ) - Get Free Report — ended the first trading session of October up more than 2%.

Reuters noted that the biggest cause of the rally was the news that U.S. Treasury yields had tumbled on weaker-than-expected manufacturing data. This drop indicated a greater likelihood that rising interest rates will curb inflation and the demand for goods.

"The economic data stream actually came in worse than expected. In a very counterintuitive fashion, that likely represents good news for equity markets," Art Hogan, chief market strategist at B. Riley Wealth, told Reuters. "[While] good economic data, strong readings had been a catalyst for selling, this is the first time we've actually seen some negative news be a catalyst."

The market's good mood extended into the next day, with all three indices rising above 2% again. Investors are even more confident that the Fed will tone down its hawkishness and that there's the potential for a strong rally occurring by the end of this year.

Why Does Michael Burry Feel Greedy?

But Scion Asset Management manager and "Big Short" protagonist Michael Burry is mega-skeptical about the American economy. According to Burry, the S&P 500 rebounded too early and made unsustainable gains after the COVID crash in 2020.

Burry thinks the current economic situation could lead to a shock worse than any stock market crisis in recent history. Since the market crashed in early 2020, lockdowns, meme stocks, crypto leverage, and rampant Inflation have pointed to a disastrous and chaotic future for the markets in general.

Recently, as the markets rose sharply at the beginning of the fourth quarter, Burry jokingly said on his Twitter account that he was feeling greedy about the latest events.

I admit I'm feeling greedy.

However, Burry later added that he was feeling greedy also in 2000, right before the dot-com bubble burst.

Just remember I was feeling greedy on the long side in 2000.

That's because, according to Burry, the recent spikes in the S&P 500 — which were caused by investors' hopes that inflation has finally peaked — are misleading.

The fund manager said that inflation has always been "peaky" and has never had a single peak. Therefore, according to Burry, investors should not be fooled by periods of mild deflation because inflationary cycles usually last for years, while inflationary eras can last for decades.

Burry: Tech Will Suffer a Penalty in the Fourth Quarter

One of Burry's recent predictions was related to tech stocks continuing to suffer severe headwinds. He points out that the undercutting model for software and hardware that has been revolutionary in recent years has been responsible for tech stocks receiving very stretched valuation multiples.

With the high interest rate scenario, naturally high-multiple tech stocks won't be able to sustain the same growth rate of past years. Apple   (AAPL) - Get Free Report recently was an example of this. The company readjusted its production targets after receiving weaker demand for the iPhone 14.

Michael Burry thinks this trend will be stronger in the fourth quarter (Q4) — on top of an already very weak performance for tech stocks in 2022. Nvidia  (NVDA) - Get Free Report, Microsoft  (MSFT) - Get Free Report, and Apple are examples of this.