Eleven interest rate hikes by the Federal Reserve have done little to alleviate the gambling craze in the U.S. stock market.
Eerily similar to the plot of the craziest moments early in the pandemic — think GameStop Corporation and AMC Entertainment Holdings Inc. –Investors wildly bid up unknown stocks, only to watch them plummet. Latest example: Wenfast Automotive Ltd.a pre-profit electric car maker that at the peak of a four-week trading frenzy was worth more than McDonald’s Corporation and four times General Motors Corporation In the eight days since, the stock has fallen about 80%.
All this shows big fool theory Gambling has now become a prominent, perhaps permanent, feature of the investment landscape in this country, with everything from football to table tennis to whether Britney Spears getting married next year now just a click away. gamble.
Peter Atwater, an adjunct professor of economics at the College of William and Mary, said VinFast has become the latest “lottery.” “The characteristics tend to be very consistent: find something that has fantastic possibilities and can be manipulated by a concerted crowd.”
As shares of Vietnamese company VinFast began mysteriously soaring in mid-August, dozens of day traders piled into the trade, fueling a six-day run of 504% gains for the company.
Buy order flow from the Fidelity platform and activity on popular chat forums such as Reddit’s WallStreetBets and StockTwits suggest that many retail investors arrived too late, snapping up shares just as they were about to start plunging. In other words, they played the bigger fool.
Boom reflects investors’ risky bets Other companies that have gone public via blank check transactions in the past year, e.g. Grinder and Intuitive Machines. An important aspect of these de-SPACs (special purpose acquisition companies that complete deals), as they are well known on Wall Street, is that only a fraction of the shares have floated on the market over the past 18 months, making them vulnerable to being pushed higher or higher. lower.
Shares of at least five SPAC companies soared more than 500% over the past year before falling back. Many of these companies have a small number of shares available for trading, attracting groups of investors on social media sites like X (formerly Twitter and Reddit) to drum up interest in hopes of getting others on board.
In VinFast’s case, about 1% of the stock is available for trading, and the timely listing of call options – an easy way to push the stock price higher – sets the stage. Over the course of six days, the stock rose from around $15 to $93 before gravity triggered an eight-day decline that sent it back to $17.15.
Even after a record losing streak, VinFast still has a market capitalization of nearly $40 billion. The company’s chairman and founder Pham Nhat Vuong controls 99% of the shares, but the terms of the blank check deal prevent him from selling.This is a company that reminds people Rivian Motors and Sober Group CorporationThe company experienced sharp gains before plunging as Wall Street grappled with its ability to reliably make and sell vehicles. Each stock is down nearly 90% from its record intraday highs, meaning VinFast’s still-lofty valuation may still be some way off.
But that doesn’t stop traders, many of whom started investing during the pandemic. Stimulate With free money and help from celebrities like Barstool Sport’s David Portnoy, they’re betting on stocks like they’re playing table games in a Las Vegas casino.
Matthew Tuttle, chief executive of Tuttle Capital Management, said: “With COVID-19, the market landscape has really changed, and the generation sitting in front of the computer realizes They can conduct transactions and organize events on Twitter or Discord.”
“I now have the ability to gamble on anything through my phone — I can play blackjack, poker, sports betting, stock gambling — and there will certainly be a generation of degenerates doing that,” he added.
—With assistance from Anne Massa
Svlook
