While the U.S. stock market had given back most of Friday’s opening highs, all three major indexes continue to trade in the green. Tech and consumer staples stocks were the top gainers as of noon, posting gains so far of 1.2%. Energy (down 0.6%) was the big loser. Crude oil traded at around $71.20, up less than 1% from Thursday’s settlement. Bitcoin dropped back to around $47,380, and yields on 10-year Treasury notes dropped by around four basis points to about 1.47%. Yields on short-dated two-year Treasuries had risen from 0.27% in early October to around 0.70% as of the latest close. Yields dropped to 0.640% in the noon hour.
Before we look at individual stocks, there’s other news to pass along related to that favorite tool of meme stock investors: the short squeeze. In order for a short squeeze to work, investors who think a stock will decline in value have to have a way to translate their thoughts into hard cash. And so, we have short sellers. The rules, such as they are, may be about to change.
Bloomberg reported Friday morning that, according to unnamed sources, the U.S. Department of Justice has begun a criminal investigation into hedge fund and research firm short selling. The investigation is looking for “symbiotic relationships and hunting for signs that they improperly coordinated trades or broke other laws to profit.”
Nothing generates more ire on WallStreetBets than the behavior of hedge funds that sell short. Most of the comments are not printable on a family-oriented website, fighting the good fight against those nefarious short sellers is a quest.
The Justice Department is somewhat more practical. It wants to know how hedge funds choose which stocks to sell short and if and how they coordinate their short sales with firms like Muddy Waters and Citron Research that produce detailed reports on short seller targets.
The investigation is in early days yet and it is possible that, when it ends, no charges will be brought. It’s also worth noting that short seller reports can benefit investors, although one would be hard-pressed to find a CEO who agrees with that.
GameStop Corp. (NYSE: GME) benefited enormously from the late January short squeeze that drove its stock from around $20 a share to $483. The stock dropped by about $19 a share to around $150 following Wednesday evening’s lackluster earnings report and lack of information on the company’s so-far invisible turnaround plan.
Shares of AMC Entertainment Holdings Inc. (NYSE: AMC) were tracking on a two-day share price drop of more than 18%. CEO Adam Aron’s sale of more than $25 million in AMC stock is apparently not sitting well with retail investors.
Earlier in the morning, we took another look at Meta Materials Inc. (NASDAQ: MMAT). The company released an update last Friday on how it is progressing on making good its promise of a special dividend to its Series A preferred stockholders who were granted the stock at the time of the late June reverse merger with Torchlight Energy. Since that merger, Meta’s stock has lost about 60% of its value.
Tesla Inc. (NASDAQ: TSLA) has notified potential buyers who don’t live in North America that it will not accept new orders for the company’s cars. Electrek offered this translation sent to a German customer who wanted to place an order for a Model X SUV:
In order to expedite the delivery of existing orders, including your Model X order, as much as possible, we are currently no longer accepting new orders for the Model S and Model X from markets outside of North America.
Tesla has not delivered a new Model S or X to Europe or other markets for at least a year and deliveries to Europe are not going to begin until the second half of 2022.
AMC stock traded down about 9.4%, at $26.69 in a 52-week range of $1.91 to $72.62. The average daily trading volume is around 43.4 million shares, and nearly 41 million had already traded on Friday.
Shares of GameStop traded down about 3.7% to $150.00, in a 52-week range of $12.14 to $483.00. The average daily trading volume is about 2.3 million shares, and nearly 3 million had traded on the day.
Meta Materials shares traded down by as much as 4% earlier in the day but had cut that loss to just 1.1% to trade at $3.17 as the noon hour drew to a close. The average daily trading volume is around 9.7 million shares, and about 2.7 million had traded thus far.
Tesla stock traded up 1.4% to $1,017.74, in a 52-week range of $539.49 to $1,243.49. The average daily trading volume is about 25.7 million shares, and more than 14 million had traded.