Raphael Stevens

A “Store Closing” banner on a Bed Bath & Beyond store in Farmingdale, New York, on Friday, Jan. 6, 2023.
Johnny Milano | Bloomberg | Getty Images

A group of highly speculative stocks rallied double digits on Wednesday as retail investors pushed meme names up again in the new year after a dismal 2022.
Bed Bath & Beyond skyrocketed a whopping 68.6% to trigger the trend Wednesday. Shares of GameStop, the original star of 2021’s meme stock mania, climbed more than 7% , while AMC Entertainment soared over 21%.

Meme stocks rallying one more time

Stock
Short interest % float
Wed. Gain
% off 52W high

Bed Bath & Beyond (BBBY)
48.9%
68%
-88%

AMC (AMC)
21%
21%
-77%

GameStop (GME)
21%
7%
-62%

Source: FactSet

“We don’t love the strength in nonsense stocks like AMC, CVNA, GME, BBBY, PRTY, etc.,” said Adam Crisafulli, founder of Vital Knowledge. “This just means people are blindly chasing.”
During early 2021, a band of retail traders joined forces on social media to bid up a slew of heavily shorted stocks, creating massive short squeezes that inflicted high pain on short sellers. These meme stocks experienced big pullbacks last year when risk sentiment shifted amid aggressive rate hikes. GameStop fell 50% in 2022, while AMC tumbled 75% and Bed Bath & Beyond plunged 82%.
While the short interest in these names has come down from its peak after the jaw-dropping episode, it still remains much higher than average.

About 48% of Bed Bath & Beyond’s float shares are sold short, compared with an average of 5% short interest in a typical U.S. stock, according to S3 Partners. For GameStop, the short interest stands at 21%, down from more than 100% at the height of the meme stock mania in 2021, according to FactSet. AMC has also 21% of shares sold short.
A short squeeze happens when a stock jumps sharply higher, it forces short sellers to buy back shares in order to limit their losses. The short covering tends to fuel the stock’s rally further.

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FTX has recovered at least $5 billion of liquid assets, including cash, crypto and securities, attorneys told a Delaware bankruptcy judge.
The crypto exchange was once valued at $32 billion but imploded after reports of financial impropriety, which led to criminal and regulatory probes and the arrest of CEO Sam Bankman-Fried.
FTX’s new CEO, John J. Ray, previously attested that at least $8 billion of customer assets were unaccounted for in the “worst” case of corporate control he’d ever seen.

John Ray, chief executive officer of FTX Cryptocurrency Derivatives Exchange, arrives at bankruptcy court in Wilmington, Delaware, US, on Tuesday, Nov. 22, 2022.
Eric Lee | Bloomberg | Getty Images

FTX has recovered over $5 billion worth of liquid assets, including cash and digital assets, attorneys in Delaware bankruptcy court said during an FTX bankruptcy hearing Wednesday.
The news comes after federal prosecutors announced plans to seize at least $500 million worth of FTX-connected assets as part of their ongoing prosecution of FTX co-founder Sam Bankman-Fried.

The recovery will be a welcome boon to FTX customers after the crypto exchange imploded in November. FTX’s new CEO, John J. Ray, previously attested that at least $8 billion of customer assets were unaccounted for in the “worst” case of corporate control he’d ever seen.

The $5 billion figure doesn’t include any illiquid cryptocurrency assets, FTX attorney Adam Landis told the court. He said the company’s holdings are so large that selling them would substantially affect the market, driving down their value.
FTX’s collapse was related to, among other things, a failure to correctly mark illiquid assets to market. FTX executives, including Bankman-Fried and Alameda Research CEO Caroline Ellison, borrowed against the value of the FTX-issued token FTT. Alameda controlled the vast majority of FTT coins circulating, similar to a publicly traded companies float, and could not have liquidated their position at full book value.
Correction: This article has been updated to reflect that FTX attorney Adam Landis told the court the $5 billion figure doesn’t include any illiquid cryptocurrency assets.

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Digital Currency Group CEO Barry Silbert and Cameron Winklevoss, co-founder of crypto exchange Gemini, are engaged in a public feud over customer assets.
At issue is $900 million of Gemini client funds that sit frozen inside DCG subsidiary Gensis.
Winklevoss and Silbert are early backers of bitcoin and have been at the center of the crypto community for years.

Tyler Winklevoss, chief executive officer and co-founder of Gemini Trust Co., left, and Cameron Winklevoss, president and co-founder of Gemini Trust Co., speak during the Bitcoin 2021 conference in Miami, Florida, U.S., on Friday, June 4, 2021.
Eva Marie Uzcategui | Bloomberg | Getty Images

Cameron Winklevoss and Barry Silbert were both early believers in bitcoin who made a fortune on their investments and built big businesses along the way. For nearly two years, they enjoyed a mutually beneficial partnership that made their customers a lot of money.
Now, the bitcoin heavyweights are in a bruising war of words that illustrates the depths of the crypto crisis and underscores the risks that were ultimately shouldered by ordinary investors who got caught up in a massively unregulated market. As it stands, hundreds of millions of dollars of customer cash sits in inaccessible limbo as the two crypto entrepreneurs battle over who is responsible.

Silbert is the founder of Digital Currency Group (DCG), a crypto conglomerate that includes the Grayscale Bitcoin Trust and trading platform Genesis. Winklevoss, along with his brother Tyler, co-founded Gemini, a popular crypto exchange that, unlike many of its peers, is subject to New York banking regulation.
Winklevoss and Silbert were linked through an offering called Earn, a nearly two-year-old product from Gemini that promoted returns of up to 8% on customer deposits. With Earn, Gemini loaned client money to Genesis for placement across various crypto trading desks and borrowers.
As the digital coin markets soared in 2020 and 2021, that capital produced high returns for Genesis and easily paid Earn users their yield, which was very attractive at a time when the Federal Reserve’s benchmark rate was at virtually zero. Other riskier (and now defunct) crypto platforms like Celsius and Voyager Digital were offering yields as high as 20%.

Barry Silbert, Founder and CEO, Digital Currency Group 
David A. Grogan | CNBC

It was a booming business. Genesis had 260 employees and a robust sales desk, and Gemini was one of its largest lending partners, sending $900 million worth of customer crypto to the firm. Gemini considered Genesis, which is regulated by New York state and the Securities and Exchange Commission, to be the most reliable name in crypto lending, according to a person with direct knowledge of the matter. Diversification was a challenge, because other players had looser risk standards, said the source, who asked not to be named for confidentiality.

Friends turned foes

In 2022, the crypto market cratered, and the Earn model fell apart.

Cryptocurrencies turned south, borrowers stopped repaying their debts, hedge funds and lenders went under, and activity screeched to a halt.
The floodgates opened even wider in November, when FTX spiraled into bankruptcy and customers of the crypto exchange were unable to access billions of dollars in deposits. FTX founder Sam Bankman-Fried was soon arrested on fraud charges, accused of using client funds for trading, lending, venture investments and his lavish lifestyle in the Bahamas.
An industrywide crunch ensued as crypto investors across the board tried to withdraw their assets. Five days after FTX collapsed, Genesis was forced to freeze new lending and suspend redemptions. In a tweet the company said “FTX has created unprecedented market turmoil, resulting in abnormal withdrawal requests which have exceeded our current liquidity.”
The contagion was so rapid that both Gemini and Genesis hired experts to guide them through a potential Genesis bankruptcy.
All withdrawals on Earn have been paused since November. Gemini’s 340,000 retail clients are angry, and some have come together in class actions against Genesis and Gemini. Winklevoss places the blame on Silbert’s shoulders, and he’s gone public with his battle to retrieve the $900 million of deposits his clients placed with Genesis.
In a letter to Silbert on Jan. 2, Winklevoss said those funds belong to customers including a school teacher, a police officer and “a single mom who lent her son’s education money to you.”
Winklevoss said Gemini had been trying for six weeks to engage in a “good faith” manner with Silbert only to be met with “bad faith stall tactics.” Gemini attorneys had attempted to work with Genesis’ team through the Thanksgiving holiday, but found their efforts effectively rebuffed, a source said.
Another person who asked not to be named told CNBC that advisors for Genesis, DCG, and Gemini’s creditor committee had met multiple times throughout the six-week period that Winklevoss referenced.
Gemini creditors are represented by lawyers from both Kirkland & Ellis and Proskauer Rose, and financial advisors at Houlihan Lokey.
Advisors for DCG and Genesis include the law firm Cleary Gottlieb Steen & Hamilton and investment bank Moelis and Company.
The most recent meeting between the three sets of lawyers and bankers was Monday, according to that individual.
On Tuesday, Winklevoss followed up with an open letter to DCG’s board, asking that it replace Silbert.
One of Winklevoss’ central complaints stems from a loan that Silbert made to Genesis after the demise of crypto hedge fund Three Arrows Capital (3AC) last year. Genesis was owed over $1 billion by 3AC when the firm defaulted on its debt. Silbert stepped in and effectively backstopped his trading firm’s exposure with a $1.1 billion intercompany loan to Genesis.
At the time, Genesis sought to reassure Gemini that the DCG unit remained solvent and strong and was supported by its parent company. Silbert justified the decision in a message to investors this week, writing that “Genesis had unrivaled expertise and the best institutional client base in the world.” Court filings show that on July 6, Genesis assured Gemini that liquidity was not a concern, and the two parties agreed to keep working together.

Gemini claims that Genesis provided misleading information regarding Silbert’s loan. Rather than serving to bolster Genesis’ operating position, the loan was a “10-year promissory note” and was a “complete gimmick that did nothing to improve Genesis’ immediate liquidity position or make its balance sheet solvent,” Winklevoss wrote.
Silbert has avoided responding directly to Winklevoss’ latest accusation, though the company has taken up his defense. In a tweet on Tuesday, DCG called the letter “another desperate and unconstructive publicity stunt,” adding that, “we are preserving all legal remedies in response to these malicious, fake, and defamatory attacks.”
“DCG will continue to engage in productive dialogue with Genesis and its creditors with the goal of arriving at a solution that works for all parties,” the company said.
A DCG spokesperson told CNBC the company denies Winklevoss’ allegations of financial impropriety.
For the 41-year-old Winklevoss twins, a public and high-profile spat is nothing new. They’re best known for their role in the birth of Facebook, now known as Meta, which was founded by Harvard classmate Mark Zuckerberg. They sued Zuckerberg, eventually settling in 2011 for a $65 million payout in cash and Facebook stock.
The brothers quickly pivoted to crypto and by 2013 said they controlled 1% of all bitcoin in circulation. The stake soared from $11 million at that time to over $4.5 billion when bitcoin peaked in 2021.
Silbert, 46, got into the market at around the same time. He sold his prior company, SecondMarket, to Nasdaq in 2015, and started DCG that year. But he first invested in bitcoin in 2012.
Silbert and the Winklevoss brothers were bitcoin bulls long before any exchanges or trading apps had made it simple to buy digital currencies and well ahead of institutional interest in the space. Now that the trade has reversed, they’re deep in the struggle.
Facing increasing pressure from creditors and the looming threat of bankruptcy, Genesis recently cut headcount by 30% in a second round of layoffs. Gemini slashed 10% of its staff in June 2022, with another round of layoffs seven weeks later.
Winklevoss says Gemini’s thousands of customers are “looking for answers.” On Tuesday, Gemini told Earn clients that it’s terminating customer loan agreements with Genesis and ending the program.
Gemini and Genesis insist that they’re negotiating in good faith. But the harsh reality is that, with the popping of the crypto bubble last year, both companies were left with no place to hide. Their clients are now scrambling to be made whole.
— CNBC’s Kate Rooney contributed to this report.

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“Free trade is almost dead,” declared Morris Chang, the founder of tsmc, dampening the mood at an event in December to celebrate a milestone in the building of the Taiwanese chipmaker’s new fab in Arizona. The remark was not out of character. In July he called America’s effort to bring chipmaking home an “exercise in futility”. Until recently, rich-world governments mostly shared his judgment. But worries about supply-chain security in a fraught world are prompting experimentation. History provides some reasons for optimism—as well as many for concern. Industrial policy is just about as old as industry itself. Scarcely had Britain’s Industrial Revolution got going when Alexander Hamilton, America’s first Treasury secretary, argued for protection of his country’s industry, declaring that Adam Smith’s arguments in favour of free trade “though ‘geometrically true’ are ‘practically false’”. America, France and Germany industrialised behind tariff barriers. After the second world war scores of governments tried to help industrialisation along, with seeming success in places like Japan and South Korea, and rather different results elsewhere. Policy today is of a different sort: pursued by countries already at the technological frontier, in a world of complex global supply chains. Yet past research still holds valuable lessons.Recent interventions are mostly based on “infant-industry” arguments. The idea is that, if the state corrects a market failure, a particular industry might thrive on its own in an economy where it is nascent or absent. Local firms might need investment in know-how or equipment to be competitive, which imperfect capital markets cannot finance. Alternatively, production might require a network of suppliers and manufacturers, but firms struggle to co-ordinate. Or there may be information problems. An economy might have undiscovered potential, but an entrepreneur who seeks it out risks revealing it to competitors, which costs him the opportunity to profit from his discovery. In each case, government support or a brief spell of protection from foreign competition (or both) might create the space the industry needs to mature. Working out if these theories are practically or merely geometrically true is no simple task. Industrial policy is never conducted in isolation, meaning it is often challenging to isolate its effects. Still, careful work suggests that infant-industry policy can work in the real world. In the 1970s, for instance, America was the dominant exporter of computer chips. The Japanese government invested heavily in semiconductor research, and may have helped chip-consuming Japanese firms co-ordinate to obtain most of their supply from fledgling Japanese producers (in effect shutting American firms out of the market). Work by Richard Baldwin of the Graduate Institute in Geneva and Paul Krugman of the City University of New York concluded that these policies supported the accumulation of expertise, without which Japanese firms could never have succeeded in export markets. More recent work by Myrto Kalouptsidi of Harvard University revealed that Chinese shipyard subsidies between 2006 and 2012 reduced costs by as much as 20%. These subsidies, she reckons, helped account for a major reallocation of ship-building, with Japan the big loser. Other research turns up more cases when interventions have helped industries secure a market foothold, and meaningfully influenced the global distribution of production. At least sometimes, comparative advantage can be engineered.Yet an abundance of caution is in order. Interventions often raise costs and thus hurt consumers. Messrs Baldwin and Krugman judged the Japanese were made worse off, on net, by the effort to build a chip-exporting industry. Because the output of one industry is often the input for another, help for upstream producers can inflict pain down the supply chain. Reviewing efforts to boost steel industries across 21 countries, Bruce Blonigen of the University of Oregon found such interventions sharply cut the export competitiveness of downstream industries.Governments, for their part, must be willing to cut off help, so that winners eventually swim while losers sink. Otherwise zombie firms will tie up capital and labour, and drag down growth. Local conditions matter. A study of eu investment funds provided to poorer regions, by Sascha Becker of the University of Warwick and Peter Egger and Maximilian von Ehrlich of eth Zurich, found that the cash translated into faster growth in investment and income—but only in places with strong institutions and educated workers. And as the world is rediscovering, careless policy can provoke retaliation, leaving everyone worse off. This may prove to be a particular problem at a time when sophisticated goods are produced along cross-border supply chains. If friendly countries fail to co-ordinate, they may end up funding duplicative plants, which cannot all be economical, or orphan industries without access to the foreign components they need to compete.Hard problemsPolicies which fill institutional gaps are safer. Douglas Irwin of Dartmouth College notes that America’s tariffs in the 19th century do not seem to have been decisive in promoting its rise to industrial dominance. Banking laws that facilitated saving and investment were more important. In their survey, Ann Harrison and Andrés Rodríguez-Clare of the University of California, Berkeley, doubt that “hard” interventions which distort market prices are of use, but find an important role for “soft” collaborations between firms and the state, to solve co-ordination failures. This does not mean the “harder” parts of America’s policy mix will doom its reshoring enterprise. Mr Chang, for his part, insisted in December that he gave his remarks “in the full expectation that we are going to have success”. Indeed, the most pressing concern may be less that America’s gambit will fail, than that it will succeed in boosting domestic industry—and leave a fractured world worse off for it. ■ More

Shoppers enter a building housing a Bed Bath & Beyond Inc. store in New York.
Mark Kauzlarich | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Meme stocks — A group of so-called meme stocks skyrocketed Wednesday as retail investors jumped into speculative trades again. Bed Bath & Beyond rallied 38% to trigger the trend in morning trading Wednesday. Shares of GameStop, the original star of 2021′s meme-stock mania, climbed about 5%. AMC Entertainment soared 15%.

related investing news

12 hours ago

Tesla — The EV maker gained more than 2% after it registered with the state of Texas to expand its electric-vehicle factory in Austin this year. Separately, Goldman Sachs named Tesla a top stock pick for 2023.
Expedia — The travel company’s stock gained more than 4% after Oppenheimer upgraded it to outperform from perform. The Wall Street firm said it believes Expedia shares are discounting macro headwinds.
Intuitive Surgical — The maker of robotic surgical systems saw shares drop nearly 5% after the company reported only 369 placements of its da Vinci robot in the fourth quarter, which was a 4% decrease from the same period in 2021. It also issued downbeat revenue guidance that slightly missed expectations, according to FactSet.
Pool Corp — The swimming pool construction company added 5% after Deutsche Bank upgraded it to a buy from a hold rating, saying that shares and earnings guidance should surprise to the upside.
AbbVie — Shares of biopharmaceutical company AbbVie shed more than 1% after the CEO said at the JPMorgan Healthcare Conference that it expects the loss of exclusivity of Humira, its drug for arthritis and psoriasis, to affect the company’s performance in the near term, according to a report from Bloomberg. The company does not anticipate a decline in 2024 earnings, however.

Alphabet — Alphabet shares rose more than 2% after Germany’s competition regulator said it plans to order a redesign of the options Google offers users for opting out of its cross-service user data processing.
Levi Strauss — Shares slid about 3% after Citi downgraded the stock to neutral from buy. Despite saying the company has a strong brand and long-term prospects, the firm said it would feel pressure in the short and medium term as denim trends worsened.
Toll Brothers — The homebuilding stock gained 3% following an upgrade to a buy from a hold rating by analysts at Bank of America. The Wall Street firm said that Toll Brothers’ valuation looks attractive at these levels.
 — CNBC’s Michelle Fox, Yun Li, Samantha Subin, Carmen Reinicke and Alex Harring contributed reporting.

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