Daily Brief: Silver’s The New GameStop, But Not Really

Daily Brief: Silver’s The New GameStop, But Not Really

about 3 years ago3 mins

Mentioned in story

Reddit-inspired retail investors were back at it on Monday, this time pushing silver’s price to an eight-year high.

What does this mean?

Investors piled almost $1 billion into the biggest exchange-traded fund (ETF) that tracks the price of silver last Friday. That surge in demand made it one of retail investors’ six most-traded assets that day, and gave the commodity’s price its biggest one-day gain in thirteen years.

Daily fund flows for iShares Silver Trust
Source: The Wall Street Journal, FactSet via Dow Jones Market Data

The timing is significant: silver’s been a hot topic on Reddit’s r/WallStreetBets – the forum where GameStop and AMC’s stocks caught fire – as retail investors try to carry out a similar “short squeeze”. The aforementioned ETF is, after all, backed by physical silver, meaning the fund provider is forced to buy the metal when it receives new investments. And if there isn’t enough to go around, its price could be “squeezed” higher and higher and higher…

Silver hits highest price since 2013

Why should I care?

Zooming in: This isn’t just GameStop 2.0.

This situation is similar to last week’s GameStop saga, but it’s different in a couple of key ways. Firstly, GameStop’s market value is much smaller – $1.4 billion to silver’s $32 billion – and as such easier for retail investors to influence. And secondly, institutional investors don’t seem to be betting against the metal like they were against GameStop. In fact, they’ve been optimistic about its chances: data shows they have, in aggregate, invested in the metal, and Goldman Sachs recommended buying the asset last year.

The bigger picture: The tail might finally be wagging the dog.

Still, the fact silver’s price moved higher in such a significant way – especially considering how much more the market is worth than GameStop – shows the very real impact retail investors are now having. It might only be a matter of time before institutional investors start following their lead in an effort to profit from the waves their smaller counterparts are making – if they’re not already.

Keep reading for our next story...

January's IPOs Broke Records

IPO image

January saw companies raise a record amount of money in their stock market debuts, and February’s looking promising too.

What does this mean?

Over 200 new stocks hit the market in January, and those initial public offerings (IPOs) were worth a combined $49 billion – up from $12 billion the same time the year before. And there are no signs the rush is slowing down. For one thing, demand’s still sky-high: the five biggest American IPOs this year raised more money than the companies were aiming for, while two of Europe’s biggest saw enough orders for every one of the firms’ new shares within 90 minutes. And for another thing, companies are accelerating their plans to go public so they can profit from high stock market prices...

Best January for global IPOs on record

Why should I care?

Zooming in: IPOs are on a high.

Four companies announced they’d be joining the UK stock market on Monday, which should come as welcome news to a European IPO market that lagged behind both the US and Asia last year. One of them is Australian firm MGC Pharmaceuticals – the first medical cannabis company to list on the London Stock Exchange since UK regulators gave the green light to do just that. MGC Pharmaceuticals – which is developing weed-based epilepsy and dementia drugs – is already listed in Sydney, but it reckons coming to London will raise both its profile and around $7 billion from UK investors.

Europe’s IPO market lagged both the US and Asia last year
Europe’s IPO market lagged both the US and Asia last year

The bigger picture: This feels familiar.

Not all analysts are sold on the IPO craze: the time might be right for companies to raise money from investors, sure, but they still need a good enough reason to ask for it. Some are even comparing it to the height of the dotcom bubble, when companies were keen to get their hands on investors’ money while the going was good – and we all know how that ended…

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