Markets Defused provides an easy-to-understand and straightforward recap of the week’s most engaging business and stock market news.
- GameStop shares collapse 40% on ‘$3 billion’ share-sale
- Roaring Kitty’s GameStop live stream: What was said
- Raspberry Pi expected to price IPO at top end of range
- Virgin Galactic rose ahead of weekend launch
- Robinhood bought Bitstamp, upping ante in crypto
- Salesforce made a big bet on London AI
- Lululemon’s international sales saved its first quarter
- Texas Stock Exchange to launch next year
- Psychedelic medicine took a hit
- Zara owner strutted higher on ‘strong’ financials
- ARM Holdings advances as bullish CEO predicts high PC demand
GameStop shares collapse 40% on ‘$3 billion’ share-sale
GameStop shares plummeted 40% in Friday’s dealing whilst Keith Gill, aka Roaring Kitty, goofed around in fancy dress on a livestream broadcast. The livestream was practically trivial compared to the more tangible news of the day, which was that the company is selling an awful lot more new shares into the market.
Having sold 45 million shares for a total of $993 million last month, GameStop revealed it would now sell another 75 million shares to investors through an ‘at the market’ (ATM) facility.
It comes at a chaotic and confusing time for some investors.
GameStop at the same time yesterday reported first quarter sales beneath Wall Street forecasts. It said sales for the three months period fell to $882 million from $1.24 billion last year – and the consensus of market analysts had been $995.3 million.
The retailer ‘narrowed’ its net loss to $32.3 million, or 12 cents per share, but again this underperformed versus market consensus forecasting, which anticipated a loss of only 9 cents.
Analysts at West Coast stockbroker Wedbush reckoned GameStop’s share would see the firm trouser $3 billion of new capital, assuming an average price of around $40.
“Assuming the newest ATM transaction is completed at $40 per share, GameStop should have a cash balance of $5 billion or so,” Wedbush analyst Michael Pachter said in a note. “With 426 million shares outstanding following the ATM, GameStop has cash per share of around $12.
Roaring Kitty’s GameStop live stream: What was said
Keith Gill, aka Roaring Kitty, claimed he didn’t have an agenda or game plan as the GameStop Corp (NYSE:GME) ‘meme-trader’ began his live stream broadcast.
And, indeed, in his first such event since 2021, there was no headline message or manifesto for his fellow meme-traders.
Instead, ‘jokingly’ wearing an arm sling and bandages on his face, he larked about a bit and answered some questions from the comments.
Over the course of the 50-minute (ish) live stream, there were a few small ‘takeaways’ – he is ‘confident in GameStop’s reinvention’, he says Wall Street has an ‘overemphasis’ on what he refers to as GameStop ‘legacy business’, he said he was trading solo and more.
Raspberry Pi expected to price IPO at top end of range
Raspberry Pi appears to be in demand ahead of its upcoming London IPO, with the single-chip PC maker set to price the share sale at ‘the top end’ of its pricing range.
The IPO is expected to price at 280p, according to latest financial media reports.
At that level, the IPO will capture £179 million of proceed, and set an implied valuation of £540 million – just over £31 million of new capital is expected to raise from the sale of new shares.
The share offering is said to be ‘already oversubscribed’, ahead of next Friday’s float.
The IPO, confirmed last month, is supported by Lansdown Partners and Arm Technology Investments. Arm Holdings PLC (NASDAQ:ARM) (Arm Holdings PLC (NASDAQ:ARM)), the British semiconductor giant, supplies Raspberry Pi’s processing units.
This new listing is seen as a positive development for the London Stock Exchange, which has faced a challenging environment for new listings in 2023.
Virgin Galactic rose ahead of weekend launch
Virgin Galactic Holdings Inc (NYSE:SPCE) trading positively in Friday’s dealing as the space tourism company prepares for the final flight of its Unity spacecraft.
The last Unity spacecraft flight is scheduled for Saturday, 8 June.
It is part of the Galactic 07 mission, with the flight set to carry three private astronauts.
“It’s #Galactic07 Spaceflight Week!” Virgin Galactic wrote Monday on X (formerly Twitter).
“Excitement is in the air as preparations ramp up for the upcoming mission. The window opens Saturday, June 8, 2024. Let the good times roll.”
This is slated to be the final flight for Virgin Galactic’s Unity spacecraft, before the company halts commercial operations to develop its new Delta-class spacecraft.
Virgin’s next vessel, the Delta spacecraft, will have six passenger seats and could conduct up to eight spaceflights per month.
Passengers can buy their place on a Delta for $600,000, whereas Unity’s ticket price was $450,000.
In New York, the stock closed the session 2.13% higher to 85 cents per share, then added another 1.5% to 86 cents in the ‘afterhours’ dealing.
Robinhood bought Bitstamp, upping ante in crypto
Robinhood Markets Inc (NASDAQ:HOOD) has struck a $200 million deal to acquire cryptocurrency exchange Bitstamp, to bolster the trading app’s crypto exposure.
It helps Robinhood accelerate its growth ambitions as it rolls out internationally, beyond the borders of the United States.
Robinhood recently entered the UK, and a more limited version of the app is available in Europe, whereas Bitstamp holds active licences for markets including the European Union, United Kingdom, United States, and Asia.
“The acquisition of Bitstamp is a major step in growing our crypto business,” Robinhood Crypto general manager Johann Kerbrat.
“Through this strategic combination, we are better positioned to expand our footprint outside of the US and welcome institutional customers to Robinhood.”
Bitstamp chief executive JB Graftieaux, meanwhile, added: “Bringing Bitstamp's platform and expertise into Robinhood’s ecosystem will give users an enhanced trading experience with a continuing commitment to compliance, security, and customer-centricity.”
The acquisition deal is expected to complete in the first half of 2025.
Salesforce made a big bet on London AI
Salesforce Inc (NYSE:CRM, ETR:FOO) has unveiled plans to make a big AI investment in London, reportedly pouring some $4 billion into UK-based operations, run out of the Blue Fin Building in Southwark.
The company, an SaaS behemoth which is best known for its Customer Relations Management software and tools, has been making a number investments in AI in the past year.
Its investments included putting money into AI voice specialist Eleven Labs.
“AI has the potential to drive major growth for UK businesses – with the UK AI market predicted to reach over $1 trillion by 2035,” Salesforce UKI chief executive Zahra Bahrololoumi said in a statement.
“To realize this opportunity, industry-leading experts must work together to develop innovative solutions and overcome obstacles,”
“By locating Salesforce’s first AI Center in London, we are sending a clear message to customers and partners on AI: we are deeply committed to working closely together so that you can reap the rewards of this transformative technology, while ensuring it is a force for good.”
Howard Dawber, London’s deputy mayor, meanwhile, added: “London is fast becoming one of the most important centres of AI businesses in the world, and we warmly welcome the decision by Salesforce to launch its pioneering UK AI Center in the capital.”
“This new UK AI Center will bring industry experts together to innovate and collaborate.
“It will provide training for Londoners to access the jobs and opportunities of the future and boost our economy as we continue to work towards a fairer and better city for everyone.”
Lululemon’s international sales saved its first quarter
Lululemon Athletica Inc (NASDAQ:LULU) first-quarter revenue beat Wall Street forecasts thanks to stronger international sales that offset a slowdown in consumer spending in North America.
The company, which is a leading brand in the so-called ‘athleisure’ trend, also announced it will conduct a $1 billion increase to its stock repurchase program.
International demand, particularly from China, bolstered Lululemon’s sales whilst flat sales in the Americas and contributed to a 6% increase in year-over-year comparable sales.
Although the numbers were better than Wall Street expected nonetheless they represent a slowdown in Lululemon’s run-rate – which was marked ‘double-digit’ percentage in the two prior years.
Lululemon reported $2.21 billion in quarterly net revenue, comfortably above the $2.19 billion predicted by analysts. It achieved improved margins, by 20% to 57.7%, thanks to tighter and leaner inventories.
Gross profit was up 11% for the quarter at $1.3 billion, whilst income from operations rose by 8% to $432.6 million. At the end of the quarter, Lululemon had $1.9 billion of cash and equivalents.
The company upgraded its guidance for the full year, forecasting annual revenue between $10.7 billion to $10.8 billion. It anticipates it will report earnings per share of $14.27 to $14.47 – versus its previous forecast of $14.00 to $14.20.
“Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver for our guests in 2024 and beyond,” chief executive Calvin McDonald said.
Texas Stock Exchange to launch next year
Dallas, Texas, could become a new American financial capital, that is if a new exchange backed by leading institutional investors BlackRock and Citadel Securities proves successful.
Reports claim that the proposed Texas Stock Exchange is set to launch in 2025, and could see its first listings in 2026, following a recent $120 million funding from a group of investors.
The exchange is expected to initially target companies based in Texas, Oklahoma, and southeastern states.
It is proposed to be an electronic exchange, and, according to reports, its scheduled to file for SEC approval later this year.
Psychedelic medicine took a hit
Psychedelic medicine stocks were hit on Wednesday after the US Food and Drug Administration (FDA) rejected a MDMA-based treatment for post-traumatic stress disorder (PTSD).
Lykos Therapeutics' MDMA-assisted therapy was not recommended by an FDA advisory panel, with the agency’s advisors taking the view that the benefits do not outweigh the risks of taking MDMA (the active compound in ‘ecstasy’).
It was a blow not just for Lykos, but also the broader psychedelic medicine sector – with shares in companies developing other treatments falling in stock market trading.
A final FDA decision for Lykos’s MDMA drug is expected later this summer, though experts note that the agency often aligns with the recommendations of its advisors.
Lykos chief executive Amy Emerson said the company was disappointed by the outcome, whilst highlighting an “urgent unmet need” for people suffering with PTSD.
Emerson noted, however, that she appreciated that “the committee faced a challenging and atypical assignment, which was to evaluate a therapeutic approach that combines drug therapy (MDMA) and psychological intervention”
The company’s new drug application to the FDA included the findings of two randomized, double-blind, placebo-controlled Phase 3 studies (MAPP1 and MAPP2) which confirmed he efficacy and safety of MDMA used in combination with psychological intervention including talk therapy provider by a qualified healthcare provider.
“Research has suggested the unique properties of MDMA may act as a catalyst to enhance psychotherapy, the current standard of care, by helping diminish the brain's fear and avoidance responses and extend the window of tolerance of painful emotions and memories, thereby allowing people to access and process painful memories without being overwhelmed,” said Jerry Rosenbaum, a Director of the Center for the Neuroscience of Psychedelics at Massachusetts General Hospital Research Institute.
Zara owner strutted higher on ‘strong’ financials
Zara owner Inditex (BME:ITX) was boosted on Wednesday after reporting a strong performance in its three months ending April.
Inditex posted revenue of €8.2 billion, a 7.1% increase from the same period last year, which at constant currency rates equated to 10.6% sales growth. Profit before tax increased by 11.1% to €1.7 billion.
It comes as the fashion retailer is rolling out a two-year investment campaign to expand its logistics capabilities.
Some €900 million is being invested this year, and, the same amount will be invested next year. At the same time, it plans to increase ‘gross store space’ by 5% between 2024 and 2026.
The fashion retailer, meanwhile, highlighted that its Spring/Summer collections “continue to be very well received by our customers”.
“Inditex continues to see strong growth opportunities,” Inditex said in a statement.
“Our key priorities are to continually improve the fashion proposition, to enhance the customer experience, to increase our focus on sustainability and to preserve the talent and commitment of our people. Prioritising these areas will drive long-term growth.
“To take our business model to the next level and extend our di¡erentiation further we are developing several initiatives in all key areas for the coming years.
Known for its brands such as Zara, Massimo Dutti, and Pull&Bear, the Madrid firm is deemed to be the world's largest listed fashion retailer.
ARM Holdings advances as bullish CEO predicts high PC demand
Arm Holdings PLC (NASDAQ:ARM) made a bullish start to the week, helped by comments from its chief executive Rene Haas, who was a keynote speaker at an industry conference.
ARM is already a dominant player in the smartphone processor market, and, according to Haas, the company is now targeting a major push for a larger stake in the PC market.
Haas reckoned that Arm could potentially capture more than 50% of the Windows PC market over the next five years – market research cited in media reports meanwhile say Arm had just 14% of the market segment in 2023.
Up until the PC market ‘chip’ market has been dominated by Intel and AMD.
The demand for AI-enabling chips is seen as a significant potential driver of growth for Arm, media reports claim.