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On Tuesday, Detroit businessman Dan Gilbert made $32 billion. On Wednesday, he lost most of it.
Gilbert owns more than 70% of the shares of Rocket Companies, which rose more than 70% on Tuesday. The rise started last week when the company reported better-than-expected fourth quarter earnings. On Tuesday, things took off, as Reddit-fueled traders squeezed the short sellers and sent Rocket rocketing. Then on Wednesday, the Reddit crowd lost interest, moving back to their favorite play—Gamestop. Rocket stock dropped, shaving $19 billion of Gilbert’s paper gain.
Politicians and policy makers are scrambling to see if this kind of social-media-driven stock mania is the result of some sort of illegal market manipulation. Perhaps it is, but I doubt it. As we learned during the subprime mortgage crisis, the worst market failures are often the result of herd hysteria, not conspiracy.
Still, market frothiness is a sign of another, more macro problem—too much money chasing too few good investments. And that means there’s probably more to come.
More news below.
Alan Murray
@alansmurray
[email protected]
TOP NEWS
Mask mandate
Target will keep requiring customers in Texas and Mississippi to wear masks in its stores, despite the governors of those states ending official COVID-19 restrictions. Macy's and Kohl's will also still require employees to wear masks at work. Coins2Day
U.K. Vs Apple
The U.K.'s antitrust regulator is investigating Apple not only over the commission it takes for in-app purchases and subscriptions, but also over the fundamental fact that it only allows iPhone and iPad apps to be distributed through its App Store. Coins2Day
U.K. Vs EU
The U.K. Is planning to breach the Brexit withdrawal agreement again, this time by unilaterally extending the grace period for customs checks on agri-food goods travelling from Great Britain to Northern Ireland. The EU is furious and threatening legal action. Meanwhile, U.K.-loyalist paramilitaries in Northern Ireland, who oppose the Brexit deal because of its trade barriers, say they are withdrawing their support for the 1998 Good Friday Agreement peace deal. Euronews
U.K. Tax
The U.K. Will raise its corporation tax rate for the most profitable companies from 19% to 25% in a couple years' time. This is intended to mitigate the pandemic's effect on public finances, and it comes with the sweetener of a two-year "super deduction" for capital investment, in which equipment purchases will get 130% tax relief. But some businesses say the corporation tax hike—the U.K.'s first in over four decades—could discourage investment in the country. Financial Times
AROUND THE WATER COOLER
Boom time
SpaceX's two previous Mars-rocket prototypes had crashed to Earth, but the SN10 rocket landed in one piece. Then it exploded. Sky News
Sputnik V
The EU's drug regulator has finally started reviewing Russia's Sputnik V vaccine, ending an extraordinary month-long standoff over whether an application had been made or not. If the EMA does approve Sputnik V, the drug's backers say, the vaccination of 50 million Europeans could commence in June. Coins2Day
Big Pharma
Pfizer was the only big beast in the vaccine world to actually come through with an effective COVID vaccine, while other smaller players such as Moderna and AstraZeneca have also found success. As Kat Eschner writes for Coins2Day: "The COVID-19 pandemic response has kick-started a new era in the vaccine industry, one that will likely be shaped by diversification." Coins2Day
WhatsApp restriction
South Africa's privacy regulator has blocked Facebook from sharing WhatsApp contact information with its other properties unless it first gets permission. The decision, which follows the furore earlier this year over the data-sharing, marks the first time the regulator has flexed its muscles in a major way. Key quote from the regulator, Pansy Tlakula: "Our legislation is very similar to that of the EU. It was based on that model deliberately, as it provides a significantly better model for the protection of personal information than that in other jurisdictions…We do not understand why Facebook has adopted this differentiation between Europe and Africa." Reuters
This edition of CEO Daily was edited by David Meyer.
