Key Events
👉 Keith Gill And The GameStop Mania: Again?
Keith Gill recently shared a post on reddit which was a screenshot of his position on GameStop, showing that he had bought 5 million shares with an average price of $21.27 and 120,000 call options worth $65.67 million expiring on the 21st of June to buy stock at $20 a share.
Why does this matter?
Let’s say that you own a stock that is currently trading at $25 and you have the ability to move the price to $40. Would you do it?
It makes sense. Buy out-of-the money call options that allow me to buy the stock at $30 for say a dollar. If I have superpowers to make the price of the stock jump to $40, the value of my options will increase by $10 (that is the spread between $30 and $40), and I will make $10 on a $1 investment, or 1,000% returns. Not shabby.
But, with options math, we use the annual volatility of the underlying asset (GME stock) in order to calculate the share price. The math is not too hard to understand. It’s simply the standard deviation of daily stock price returns for a period of time (longer the better to avoid noise – a stats concept) multiplied by the square root of the number of trading days in a year. This volatility gets baked into calculating the stock price movements (either up or down)
The way to move the price of the stock is to make public statements. However, the average person cannot make a public statement that goes like ‘I believe that this company has discovered an anti-ageing pill and therefore I am bullish’ and sell my options when the stock takes off.
However, if I show the public that I own tons of company stock, maybe it indicates that I have information that you (the market) don’t. The market will sense the message that I am bullish. That’s exactly what Keith Gill did. After he posted the screenshot, the GameStop stock price rose to $40.50 and the call-options that he bought at $5.67 got as high as $21.10.
👉 Spotify Raises Prices Again, Lifting It’s Stock
Spotify, testing its pricing power, raised prices on individual plans by a dollar and family plans by three dollars.
Despite its leading position in the streaming industry, Spotify struggles to demonstrate consistency in its earnings to investors—most of its earnings go to labels and other right holders.
The latest price increase is expected to cover its recent entry into audiobooks. The stock rose by 5.7% to $313.62 on Monday.
👉 Will The Dollar’s Strength Last?
The US dollar has strengthened this year. Because of inflation rates, investors did not expect rate cuts, meaning that high interest rates attracted foreign investment, boosting the demand for dollars and strengthening its price.
The dollar hasn’t been so consistently strong since the reign of Paul Volker who famously pursued a hawkish monetary policy. In 1985, the dollar became so strong that the US had to coordinate depreciation.
Something similar could happen today though at a much smaller scale, more so if Trump wins the presidential election in November. His past advisors have advocated for a weaker dollar to narrow the trade deficit.
Mergers and Acquisitions
Suntory, a whiskey-maker, is in talks to acquire Boston Beer for $3.8B.
Initial Public Offerings
Shein, an online fashion company, is looking to file a London IPO prospectus that could value the firm at $63.7B.
Venture Capital
ARPA Network, a startup specializing in decentralized secure computation, raised $6M in funding led by Laser Digital and DeFiance Capital.
