We forgot the idea of make and the idea of experimentation. In the meantime, investors would be wise to be cautious when trying to benefit from meme mania.We forgot the Ape Together Strong Hold GME Gorilla Rocket Gamestonk Meme Shirt and I love this idea of craftsmanship. It’s a strange time to be an investor, but over time fundamentals will come back into play and the markets will revert to rational behavior. No one can predict at this point how this will all play out, but investors would be wise to be very careful in trying to tame this gorilla. Many theater fans will return but not enough to support a $41 billion valuation. People with big screen HD TVs at home are bingeing on Netflix NFLX or watching new movies on Disney+ and HBO Max at the same time they hit movie theaters. But, in the interim, there’s been a massive secular change. Post-Covid, there is surely pent-up demand to return to movie theaters. Even in a peak year before Covid, AMC had less than $1 billion in free cash flow which compares unfavorably with its current $41 billion valuation. That may allow the company to avoid bankruptcy, but original shareholders have been diluted heavily and the company still has negative cash flows. Like a self-fulfilling prophesy, it was nearly bankrupt and then people bid it up like crazy, allowing management to sell more stock and all of a sudden, it has $2 billion of cash and the crisis is over. As a meme stock, even though its fundamentals were terrible, management was able to issue new stock and dramatically boost shares outstanding. But for most, it seems like just a matter of luck as was the case with AMC. There are some companies that are meme stocks, which might be interesting opportunities. So, somebody is going to lose their investment and it will likely be shareholders. GTT bonds, which are senior to equity, trade at just 12 cents on the dollar. But management’s latest plan is to wipe out their shareholders entirely. ![]() It currently trades at around $2.50/share, down from $4 a few days ago. It still trades on the NYSE despite not having issued public financials for over a year. For instance, GTT, another recent favorite of the Reddit crowd, is a telecommunications company that’s facing bankruptcy. ![]() Right now, we have a continuing bubble in fixed income securities, with $14 trillion of negative yielding government debt, as well as this meme stock bubble.Īs we’ve said numerous times in this space, the worst positioned companies are those with negative cash flows and near-term debt maturities. There have been other bubbles in the past, from tulip mania in the 1600s, Britain’s South Sea bubble in the 1700s on through the dot.com and real estate housing bubbles of this century. This is a temporary phenomenon, and the market will eventually return to some semblance of reality. Certainly, none of this frenetic activity has anything to do with fundamentals.įor AMC to have a valuation of $41 billion, or Hometown International, which consists of a single sandwich shop with $35,000 in sales over the last two years, to be valued at $100 million, just doesn’t make any sense. The underlying principle is the same, it’s just a lot easier to do now. ![]() It’s just as sinister as the old penny stock “pump and dump” schemes where boiler room operators would cold call to bump up a stock price and then quickly cash out leaving suckers holding the bag. These groups seem to be acting in concert to manipulate the market by forcing short sellers to cover their resulting losses. It seems that participants in these online forums are posting notes with suggestions like “let’s drive up today” and then it happens. It’s getting so there are new examples everyday where an online group agrees to target a stock and drives it up to absurd levels before it drops 20-30% or more in a few hours.
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