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Illustration: Aïda Amer/Axios

Back in focus: The meme stock trade.

By the numbers: GameStop finished up 19%, after a wild day that saw shares spike as much as 80%.

Why it matters: The moves are muted compared to the eye-popping gains that shocked the world last month.

  • But the surge means online traders banding together on social media boards could be a lasting feature of the U.S. stock market.

What's going on, technical answer: The steep gains that started Wednesday night were "mostly long buying with short covering sprinkled in to help grease the skids up," says short-selling expert Ihor Dusaniwsky.

What's going on, more fun theory: A CFO resignation and a tweet featuring an ice cream cone are riling people up.

  • GameStop says its chief financial officer is resigning — an executive who was once respected (at least by traditional investors) for helping shape up the company's finances.
  • The C-Suite swap is now seen as an opportunity for change, a theory fueled by a picture of a McDonald's ice cream cone tweeted out by board member Ryan Cohen — a major shareholder who gained a board seat (and thus more influence) earlier this year.
    • Much like McDonald's is known for fixing its broken ice cream machines, the thinking is Cohen was signaling that he would "fix" GameStop.

What they're saying: "This doesn't make any sense," Anthony Chukumba, a longtime Wall Street analyst, told CNBC Thursday of GameStop's wild rally.

  • "And you know what, call me a boomer. I'm totally fine with that."
  • He said the stock is worth $10, at the most.

What to watch: All eyes will be on GameStop if and when the company takes advantage of the hype to grow its struggling business.

  • It wouldn't be the only Reddit stock to do so: AMC took advantage of its stock surge by swapping roughly $700 million worth of debt into equity.
  • It's "curious" that GameStop hasn't issued shares at this soaring price — a move companies do to raise money, Telsey Advisory Group's Joe Feldman tells Axios.

Go deeper

Dion Rabouin, author of Markets
Feb 25, 2021 - Economy & Business

The meme stock rally returns

Expand chart
Data: FactSet; Chart: Axios Visuals

Shares of GameStop rose by more than 100% on Wednesday, with almost the entirety of the gain coming near the close of trading.

Details: Shares were halted less than 30 minutes before the market closed and the stock ended the day up 104%, the most since Jan. 29, when trading platform Robinhood restricted buying in it and 49 other stocks at the height of a market frenzy.

Felix Salmon, author of Capital
Feb 24, 2021 - Economy & Business

Lucid's confusing road to going public

Illustration: Annelise Capossela/Axios

You've never seen a Lucid automobile, let alone driven one. Still, at the close of trade on Wednesday, Lucid Motors was valued by the stock market at $46 billion — roughly the same as Ford Motor Company.

Why it matters: In the absence of any actual product, the main driver of the electric vehicle start-up's reputation has become the stock market. Deliveries of its first car won't happen until the second half of this year at the earliest.

  • The catch: It's always dangerous to conflate a company with its share price. In this case, because Lucid chose to go public via a SPAC, rather than through a traditional IPO, the narrative has become even more confused.

How it works: The company taking Lucid public is a special-purpose acquisition company, or SPAC, with the unwieldy name of Churchill Capital Corp IV. For the time being, CCIV, as it's known to traders, is simply a box of money holding $2.1 billion in cash.

  • CCIV has agreed to swap that cash for 258 million shares in Lucid, as part of a bigger deal that also includes outside investors putting in another $2.5 billion for 167 million shares. In return, Lucid gets not only $4.6 billion in cash but also a stock-market listing.
  • The deal is fantastic for CCIV. It has turned its $2.1 billion into shares that, at Wednesday's close, are worth more than $7 billion.

Flashback: Shares in CCIV were bid up on the stock market in anticipation of the deal. The lower the price that CCIV managed to buy Lucid for, the more CCIV's shares would ultimately be worth.

  • Until Monday evening, no one knew what the merger price would be, so the value of CCIV shares was largely guesswork, even with the heroic assumption that the ultimate market value of Lucid Motors was a known quantity.

Driving the news: After the deal was announced, headlines started appearing saying things like "High-profile SPAC craters" or "Lucid Motors confirms SPAC deal: CCIV stock down 25%." Those headlines risked giving the impression that the stock market didn't welcome the deal, or that the valuation of Lucid had somehow fallen.

  • Reality check: The stock market loves this deal, and loves Lucid, which now carries a truly stratospheric valuation far greater than anything that CCIV was valued at pre-merger. Not that the pre-announcement CCIV share price really meant anything at all, beyond the fact that investors were very excited to get the opportunity to buy into Lucid.

The bottom line: One of the biggest problems with SPACs is that most normal stock-market investors don't yet fully understand how they work.

  • While going public via SPAC can make sense for companies like Lucid, it does tend to be accompanied by a fair amount of confusion and beffudlement.

Scoop: U.S. begins denying Afghan immigrants

Afghan refugees on a bus bound for temporary housing after arriving in Greece. Photo: Byron Smith/Getty Images

The Biden administration has begun issuing denials to Afghans seeking to emigrate to the United States through the humanitarian parole process, after a system that typically processes 2,000 applications annually has been flooded with more than 30,000.

Why it matters: Afghans face steeper odds and longer processes for escaping to the U.S., despite the earlier sweeping efforts by the Biden administration to assist its allies. Immigration lawyers and advocacy groups say the government has set untenable barriers to a safe haven in the U.S.