GameStop & meme stock madness: YF Reports

GameStop (GME) is dominating headlines again this week. Yahoo Finance jumps into meme stock madness and gains insights from Former SEC Enforcement Branch Chief Lisa Braganca, examining potential legal ramifications for Keith Gill, also known as 'Roaring Kitty,' amidst the current surge in GameStop. We also hear from Apex Fintech Solutions CEO Bill Capuzzi regarding E*Trade's possible ban on Keith Gill from their platform. Yahoo Finance's Ross Mac also offers guidance on seeking financial advice from Reddit (RDDT) or other social media platforms.

Video transcript

Meme stock madness.

Well, it all started with a cryptic post on Reddit by roaring kitty an account connected to Keith Gill.

Since then, Gamestop has skyrocketed and other meme stocks like Blackberry and A MC have also popped.

Will this trend keep going or will it fade away?

Tune in to hear what our experts have to say.

Let's move on to another top story that we are watching and that's the mean socks.

A game stop is was falling here initially had been halted several times since the start of trading.

It's been all over the map and you're now losses of about 17%.

The company announcing plans to sell up to 75 million more shares also releasing earnings early that were a bit of a disappointment.

And us right has a closer look at some of that movement that we're seeing here today in.

Yes, Rana and the gamestop saga took an unexpected twist this morning as a company, as you mentioned, unexpectedly dropped its latest quarterly results and filed to sell more shares.

Now, this all comes hours before that youtube channel believed to be linked to retail trader and investor Keith Gill.

Uh announced that uh that live stream is going to be happening today at noon.

So let's take a look at what the results are.

Net sales dropped 29% year over year to 880 $2 million for the quarter.

Versus estimates for 995 million.

A loss per share came in at 12 cents versus estimates for a loss of nine cents per share.

Net loss narrowed to 32.3 million compared to more than 50 million for the same period last year.

So between these results and the share sale plan, the second one, by the way, in a span of about a month, the stock is down, you're seeing in early trading.

This comes after also shares had yesterday 47% and then they gained another 30% in after hours yesterday.

This is after that youtube channel believed to be linked to Gill plans to hold a live stream today and the alias on reddit that also is believed to be linked to Gill posted its portfolio with gamestop stock and unexercised call options, ballooning to more than $500 million with unrealized gains of more than 380 million.

Now, a lot has been said about uh whether what Keith Gill uh if it's him uh post these postings, whether these are legal or not we have spoken to experts uh about this.

Look.

It also, I do wanna note that when these posts come out on these uh portfolio holdings, you'll, you'll recall that they come out before um uh the market open or after the market opened.

So it's not during market hours.

We we do have to say that guys got shares of gamestop.

Now off today, 18% of reversal from the massive gains that we saw yesterday.

Now the move lower today coming after the company saw revenue declined, more than expected, also filed to sell up to 75 million of its shares, more of its shares.

When you take a look at this here, Brad, I think the big question obviously not really a question.

My takeaway here from this is we have seen a lot of excitement surrounding gamestop.

We have seen a lot of excitement surrounding the meme stocks when it comes to gamestop.

All of that mo most of that being driven by obviously posts that we have gotten from roaring kitty here over the last several weeks, going back to that first uh post that he had on X just about a month ago.

When you see the results here that the games have had before the open, you can tell fundamentals haven't changed if anything, they've gotten worse yet, we're still seeing some excitement surrounding this name.

So again, shares under pressure here today but still but not giving back the games that we saw yesterday.

All the glasses for this one, honestly, like what you even say the company is so detached from fundamentals.

We knew that they would probably do this similar to what we've seen other meme to meme stock style uh companies do.

It's make sure that they can capitalize on when traders are hot to trot on their ticker symbol.

And so what do they do during that time?

And this is a button that gamestop has hit before they tap the markets for more liquidity and that just gives them even more of a lifeline to say, oh yeah, deliver on some lackluster results for future quarters as well as long as they can stay in business.

But one thing that I will note within this first quarter overview that they did post this morning, net sales came in at $882 million for the first quarter you compare that to and this is the time that you were talking about the prior year, first quarter, 1.27 or $1.237 billion in the comparable first quarter for last year.

So that was down significantly.

You also see them right now in this effort to actually get some more liquidity, their cash and cash equivalents and marketable securities sitting at about $1.083 billion at the close of the quarter.

It'll be interesting to see what this does in terms of uh the issuance of 75 million more shares in trying to beef up some of their own liquidity coffers as well.

Um But the long term debt remains limited to low interest, fortunate for them.

So they won't have to pay too much uh interest on it compared to what they could or should be paying game stop here that are soaring today as we talked about earlier, some 40% trading got halted several times in the last hour and a half or so because of volatility.

And what was the catalyst?

Well, guess what it was?

Keith Gilligan also known as Roaring Kitty.

He posted on youtube, he didn't really post, I mean, it's sort of a post, it's gonna be a live stream.

And at noon tomorrow, right?

Basically, all this post says it's sort of a um a very Mimi placeholder screen here that says there's a live stream he's going to be doing um that he hasn't done what in three years time now, starting at noon tomorrow again, noon on June 7th and the commentary.

You know, there's, of course, the comments box on you has not stopped.

There's nothing to look at yet.

I'm looking at it right now in your, it hasn't stopped.

It's just scrolling constantly.

People commenting before he's even said a word.

Yes.

And I mean, he has the capacity to do that.

If we go to the Wi Fi Interactive, I'll point out a couple of interesting things here.

This is a $15 billion company and check out the pe ratio.

We're talking about eye watering levels from the.com era 2232.

That's, that's, it's really high.

Uh But let me, let me show you what happened in the chart.

This is year to date and what stands out is, are these big spikes here?

And, uh, here's another one and this kind of reminds me of what happened in 2021 because, uh this is much more compressed, but there is some space.

We'd have an episode, then we'd have a few weeks for us and, and, you know, maybe it's tied to the option schedule, maybe it's tied to something else.

Um, and there was all kinds of speculation how much had had the traditional Wall Street, like hedge funds infiltrated reddit.

Uh, but Keith Gill has been conspicuously silent.

He's posted some things, but he's been silent and now he gets to speak.

So I, I'll be watching it and I wonder if he's spoken to a lawyer before he is speaking to us because of course, as we know the securities and exchange commission is reportedly looking into, um, his recent activity.

Remember he spoke the market.

Yeah, I mean, he posted a screenshot that says he owns about 100 and $16 million worth of games to stop shares, which would make him one of the largest holders.

We'll see what he's gonna say about all of this.

Yeah.

And I mean, just to be clear, it's not against the law.

To talk your book, but you can't lie about it.

So he'll be in the crosshairs but maybe we hear a little bit of uh looking forward tomorrow and so is everyone else?

Apparently the stock investor Keith Gill, also known as Roan Kitty, of course, on social media, he's under regulatory scrutiny, the Massachusetts securities Regulator looking into Gill's gamestop trading activity and social media use.

This comes after shares of the video game retailer surged after a REDDIT account that's associated with Keith revealed a huge stake in gamestop.

Joining us.

Now to discuss, we have Lisa began former SEC enforcement branch chief where she led investigations into securities insider trading, market manipulation and other trading practices.

Lisa, great to speak with you.

You can give us a really good insight into kind of the legal back and forth here because you were formerly SEC.

Now I know you represent individuals who may be under regulatory scrutiny.

So talk to me about the single biggest case that the SEC could have against Keith Gill here, given that he is disclosing a lot of his activity, which is typically what the SEC wants is disclosures.

Thank you for letting me be here.

And uh I, so the issue is generally disclosure.

Uh I think that regulators are looking at, is this a market manipulation?

Is there some insidious um uh purpose behind these posts that Keith Gill is making?

And are they basically being done so that he can make more on his holdings.

Now, I, I'm not saying that they have a good case on that.

I have no idea what his private conduct is.

He has chosen to disclose what his holdings were at a snapshot in time.

He may continue to be holding all those calls on gamestop stock and, and all that long position on gamestop stock.

But if that changes, if he sells some stock now that it's bumped up, if he sells his calls or exercises his calls, that may be a problem.

Um I I, but I think the main thing that the regulators will be looking at is uh is he coordinating with anybody else which we have no evidence of at this point?

But you wouldn't expect to see evidence of that in the public realm.

And then the next level is, is there some kind of private benefit that he is getting from this his public post basically.

Is this a pump and dump?

So Lisa, my question to you is, is the point that you just brought up is whether or not he is coordinating with others, I guess more specifically in order for regulators to prove that what size of that investor base, how many people, how do they determine?

I guess whether or not it is market manipulation versus him just telling a few people about what he plans to do or could do.

That is a, as the sec often says, and, and other regulators it's figured out on a case by case basis.

It really depends on the facts.

It could be two people um who are secretly doing things, the marketplace that make it appear that um the star or drives the stock up.

So there has to be something that rises to the level of a manipulation if I just, uh you know, purchase 20% of the stock of a company and I publicly disclose that I've purchased 20% of that public company.

That's just disclosure.

So here, the question is what do those other, uh posts mean when he's talking about leaning in, he posted something, you know, picture of somebody leaning in and then he posted an uno reverse card, who knows what that means and, and then what is going on that's not public.

So I would be concerned if I were advising him um, on what he's gonna do with those call.

Options.

Options are not ST you don't just hold them forever.

Well, you can hold them to expiration, but the expiration date on these options is June 21st.

That's a short time frame and he's gonna have to make a decision before June 21st, whether he's going to sell them and he would make a profit on them at least at the moment or whether he's gonna hold them and have to come up with hundreds of millions of dollars to fulfill his obligation under those contracts and buy the stock.

So Lisa, final minute with you here, let's say Keith Gill watching our show as I'm sure he does every morning he hears your insights, gives you a call.

What advice do you give him today about what he should do?

Moving forward?

I would advise him and again, I shouldn't be giving legal advice on online, but um in general, I don't know the facts, but I would tell folks like him to disclose before you sell that you intend to sell.

Um, if you want to sort of get out of jail free card, if that's more important than, you know, a regulatory investigation, and that's always a, that's a business risk.

But you know, if you disclose first and say I intend to sell on June 10th, all of my call options, then the market can absorb all that information and then you sell.

Now that's probably gonna drive the price of the calls down because he's a big holder of call options.

But if you wanna avoid, um, you know, regulatory scrutiny of your, what you, whatever you do with those call options, that's something you can do, Lisa Braganza.

We really appreciate you taking the time to join us here for your insight this morning.

Former sec enforcement branch.

Thanks so much Lisa Stock seem to be losing steam after shaking up Wall Street on Monday, the latest round of gamestop, Fervor kicking up again on an account believed to be tied to investor.

Hell, he's the guy who night the whole meme stock rally back in 2021 revealed that it spent nearly 100 and $75 million building a position in the video game Tailer using online trading platform E trade.

Since that post, there's now ongoing discussions and Morgan Stanley's E trade to ban Gill's account, that's according to the Wall Street Journal.

Now, this raises the question of whether or not more companies need to be on the lookout for our social media is impacting trading here to weigh in.

We've got Bill Capuzzi.

He is CEO of apex fin tech solutions that is a digital wealth management company.

Bill.

Thank you so much for being here with us.

I mean, as I mentioned, E Trade is considering blocking Keith Gill from the platform and the growing concern about stock manipulation.

Would you consider the same?

Yeah, look, you know, when I looked at the, the, you know, the facts that I can see based upon what uh Keith has done really, there's no reason to be banning him from their platform.

I think it's actually a black eye for, for Morgan Stanley to take this uh position, right?

It's no different than someone like Warren Buffett putting out uh sort of 13 f filings for Berkshire Hathaway in that obviously a smaller sense uh in the case of, of Keith Gill, but he's basically put out his positions that he owns.

Um he's published them on social media and uh it's obviously created some stir in the market, but from an outsider looking in without seeing all the facts, I don't see anything wrong with what he's done.

And, and so as we're taking a look at the update that came through yesterday, that was posted online, I mean, this comes back to what had taken place in some of the proceedings on Capitol Hill when there was a lot of fact finding in the wake in the aftermath of the height of the meme stock frenzy in January of 2021 where then elected officials were trying to figure out, ok, how is it different for someone to go on social media and just post what they might talk about at a backyard, barbecue and their holdings and their positionings and what they're invested in and you know, what their strike dates might look like all of those things versus what Wall Street has been known to do and firms have been known to publish for years and, and the difference there, is it any different than what was already found out at that time?

Right now, look, first of all, the environment is incredibly different than it was in 2021 right?

What happened back then?

Right?

Um Let's just take gamestop, it was called a hard to borrow, right?

So there's a big short squeeze.

And part of the reason for that was that there weren't a lot of shares to borrow to cover the shorts.

All right.

And it caused challenges.

Number one, number two was we were settling trades in what was called A T plus two environment.

So you settled trades two days later.

Uh last week we moved to T plus one, which definitely changed the environment in terms of trading.

What it means is that I buy or sell something today and tomorrow it settles, right?

And it creates a better environment for us, right?

It creates a lot less risk for the, for the uh for the entire street specific to his trades.

To your point, Brad, it's no different than, you know, an institution filing their 13 f filings, right?

In terms of what he's doing, there is a fine line.

It's, you know, if they're posting on social media, hey, this is what I'm doing, right?

Having the position after, right?

And causing manipulation in the stock that obviously is illegal, right?

But from what I see in terms of Keith Gill, um I don't see any issue and frankly, we would invite him on to the Apex platform, you know, based upon the facts and circumstances that I see, right?

He's expressing his views in terms of what he thinks.

Um you know, in terms of GME um A MC, some of the different meme stocks, I don't see any issue with what he's doing.

Well, Morgan Stanley would say the issue is that they would likely say that the issue is the call options prior to posting?

To what extent do you think that that is a valid argument?

I, I mean, he, he bought call options.

Right.

So again, he's expressing his view, what I love is the fact that we've lowered the barriers and allow for retail investors to use things like equities, like options to, again, express their views.

He had bought these options and he actually took a post and said, hey, I have these options on, right.

There's nothing wrong with that.

So again, you know, make the analogy to Warren Buffett or to any other institution as the post 13 F filings, they're telling you what their positions are, right?

There's nothing wrong with that.

Well, Bill, you said at the beginning of our interview, you called this a potential black guy for Morgan Stanley, if they do in fact, block him from the platform, how likely do you think e trade would be to lose other customers if they make that move?

Very likely, right?

So let's go back to 21 and then fast forward to today, which is amazing for our industry is retail investors have power, right?

That we've lowered the barriers, folks like apex creating a platform that allows for people with small amounts of money.

This is not a rich person's game anymore and effectively allow these people to access the market.

Um And so my sense is that if they kick him off the platform, for sure, there's gonna be backlash from for Morgan Stanley e trade in terms of others saying, hey, this isn't fair.

He didn't do anything wrong as far as what we see again.

I don't have all the facts but based on what I see, I don't see anything wrong with what Keith Gill is doing.

Bill Capua, who is the apex Fintech Solutions?

CEO joining us here, Bill.

Great to see you.

Thanks for hopping on.

Good to see you.

Thank you, Ro and Kitty back in the news after provoking yet another game.

Stop.

Rally a question many beginner wealth builders have is, should you trust financial advice from Reddit and social media for some tips and warnings?

We're joined by Yahoo, finance contributor, Ross Mack.

Hey, Ross.

Good to see you, right.

How's it going, buddy?

Going?

Well, going well.

All right.

So what do the good people need to know if they're tapping into fin talk or Reddit or any forum where people are sharing some of what their portfolio may look like?

Yeah.

Well, one, I'm always gonna be in the in the camp of actually arguing that the benefits can outweigh the negatives.

Right.

At the end of the day, we're talking about people coming together.

We're democratizing the access to information, right?

We're talking about maybe sharing, you know, secrets and skill sets that otherwise we probably would not have heard of and that can stem from health and recipes, parenting advice and obviously money management and investing right.

I'm kind of part of that community, but there always is, you gotta always err on the side of caution, right?

And I think when it comes to the negatives, you have to understand that unfortunately, some people romanticize the idea of trying to attain something that they probably never are gonna get.

Right.

And as a result, some people can fall victim to either scams and bad players.

I think if we look back historically, especially with this roaring kitty that being the Gamestop, a lot of people actually fell victim, right?

You look at that and couple that with the the doge coins of the world of certain NFTS.

What happened is people on these Reddit and you know, social media communities, they're now kind of having this herd mentality where it's like, hey guys, Yodo Hole, I'm sorry, YOLO Hole, everybody's gonna have diamond hands, right?

I remember when Gamestop was so big.

Everybody was saying Gamestop is gonna get to $1000.

So now you have people thinking that they're gonna become millionaires and instead end up losing their life savings and thousands of dollars.

And so in the event, you are part of the community and saying, OK, I heard of this on social media, I now want to take the advice.

I think first things first, you have to ask yourself, is this person qualified that is giving me this, you know, this advice, right?

Is he or she qualified?

And the next, you have to do your own due diligence, right?

I can't stress that enough, right?

Everyone do your due diligence because you have to ask yourself, is this company, how do they make money?

Right?

What's the competitive advantage?

Right?

What's the use case?

Especially when we start talking about, you know, crypto, et cetera.

And then you just gotta ask yourself, am I gonna be using money or investing money that my life's not gonna, you know, crash and burn in the event I lose it, right?

You don't wanna be risking money because every investment is a form of a risk.

So you don't truly wanna be risking money on a investment that has a lot of uncertainty that, you know, you can't afford to lose.

Certainly.

And we're, we're taking a look at some of these safety tips as well here.

I mean, it's, it sounds really compelling sometimes when you hear stories of multiple traders hopping in and there is a whole momentum trade as well that a lot of people perhaps get wind of and they say, all right, I don't want to miss out on the momentum, but of course, uh you don't wanna chase the trade as Steve Sos from interactive brokers uh was telling us yesterday.

Yeah, I mean, I think there's a great saying is that the moment you hear about it, unfortunately, it's too late, right?

And so in these momentum trades where to the to your point, you know, once you get publicized on social media, chances are there are some wolves in sheep's clothing that are actually, they're bad players.

Right.

There are people that, you know, are using, you know, bots that are making you think that this is advertisement when, in fact, they're trying to now drive the price up and make you want to buy it and now guess what, you're getting out.

Same thing when we talked about sports gambling right at the end of the day when you see someone wager $20 and made $200,000 guess what that is?

Advertising to hope that you yourself go do the exact same thing.

And so when you hear about, oh, you know, certain cryptos or certain, you know, YOLO various stocks, guess what?

Unfortunately you're being advertised to and they're hoping that you yourself go buy it so that they can get out and exit at a higher price.

Yahoo finance contributor, Ross, Mac Ross.

Thanks so much for keeping tabs on all things reddit and even more with the momentum trades out there.

Appreciate it.

Absolutely.

Thanks for having me.

Thanks.