💭 Are we in a bubble?

RBI flags stock market concerns, AMC and GameStop shares are soaring, QuintoAndar raises $300 million, and some more updates.

the mesha tribe

May 28, 2021

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Read Time: 953 words, 4:46 minutes

There’s so much to cover today so let’s get started.

First up,

Market Snapshot 📈

Sensex: 51,422.88 (+0.60%) ↑

Nifty 50: 15,435.65 (+0.64%) ↑

Dow Jones: 34,464.64 (+0.41%) ↑

Nasdaq 100: 13,657.85 (-0.33%) ↓

Bitcoin: $35,900.35

Top Stories 📰

1. RBI flags asset "bubble" concerns 🤔

In its annual report, India's central bank raised concerns about the stock market "bubble," citing a more-than-double growth in the country’s benchmark indices since the slump in March 2020, when the pandemic first hit.

Sensex, which was at 38,144 in March 2020, has crossed the 50,000-mark to reach 51,115 in May 2021. During the same period, the price-to-earnings (P/E) ratio advanced from 23.2 to 31.7.

It also said that the stock markets are "overvalued" as dividends fell below historic levels while the P/E ratio remained above the long-term trend.

The growth is contrasted by India's shrinking GDP, which the RBI expects will contract 8% in FY22 and will only fall further amid virus surge, raising concerns around investment and consumption.

Citing its autoregressive distributed lag (ARDL) model, which considers variable such as economic outlook, Sensex movement, and Foreign Portfolio Investments (FPI) flows, the RBI said that the rise in stock prices was mainly due to money supply and increased FPI inflow, and while the economic prospects contributed to the shift, its impact remains minimal.

Indian equities received the highest-ever FPI investments of Rs 2.74 trillion in 2020-21, beating the previous record of Rs 1.4 trillion in FY13. According to the RBI, these cash injections drove up the prices and would need “calibrated unwinding” once the economy recovers as it can lead to inflationary asset prices.

Why it matters? RBI said that the macroeconomic costs, mainly employment, output, and lives lost, can be limited if the second wave peaks by Mid-May. Post that, the losses are expected to be unfavourable and long-lasting.

2. Another short squeeze? 🤯

Meme stocks are back in action!

Two of the biggest meme stocks, AMC Entertainment and GameStop, reported massive gains this week as retail investors (mainly Redditors) attempted to push for another short squeeze on institutional investors and hedge funds.

AMC Entertainment advanced more than 45% during afternoon trading hours, pushing its market cap to reach $11.94 billion. Meanwhile, GameStop fell slightly short as it grew 20%. The performance gap is mainly due to the demand and supply factors hugely influenced by social media interest and momentum-based trading.

Recently, AMC raised $428 million by selling 43 million shares after "AMCsqueeze" started trending on Twitter. Taking advantage of the recent rally, AMC's largest shareholder Wanda Group also sold its majority stake.

This entire incident cost more than $1 billion to short-sellers betting against GameStop and AMC.

However, Redditors did not stop at meme stocks as they revived an LA-based food company, Beyond Meat, which recently became the target of short-sellers. The company's shares soared to nearly 13% on Thursday.

Why it matters? Since the onset of the COVID-19 pandemic last year, AMC has lost nearly $4.6 billion, compared to $149 million in 2019. Despite these losses, CEO Adam Aron said that AMC performed better than other movie theatre chains as the company's stocks saw a 25% surged compared to pre-pandemic levels.

3. Today's big deals 🎉

Infinite Objects raises $6 million
Infinite Objects, a New York-based company that makes physical frames displaying video of an image, video, or GIF looped forever, has raised $6 million in seed funding, led by Courtside VC. NBA Top Shot creator Dapper Labs, Ashton Kutcher’s Sound Ventures, Serena Ventures, Kevin Durant & Rich Kleiman, and others participated in the round. Since 2018, Infinite Objects has collaborated with several artists to make limited edition screens and has shown keen interest in NFTs — unique cryptographic tokens that cannot be replicated. In fact, the company had partnered with artist Beeple, who sold his NFT for $69 million at Christie's auction, to release physical tokens of his NFT. In 2019, Infinite Objects raised its first seed round for an undisclosed amount from Brooklyn Bridge Ventures.
Brazil's QuintoAndar raises $300 million Series E round
QuintoAndar, a São Paulo-based proptech startup that offers an end-to-end solution for long-term rentals in Brazil, has raised $300 million in Series E round at a $4 billion valuation. Ribbit Capital led the round, with LTS, SoftBank’s Innovation Fund, Alta Park, Maverick, among others, participating in the fundraising. The recent round brings its total capital raised to $635 million. The company has over 100,000 rental properties under its management and more than 60,000 properties in 37 cities across São Paulo, Paraná, Minas Gerais, Rio de Janeiro, and Rio Grande do Sul. With this capital, QuintoAndar looks to expand into new regions in Brazil and is planning to venture into global markets, starting with its launch in Mexico later this year.

Tweet Of The Day 🌟

Twitter confirms its upcoming subscription service 'Twitter Blue' which costs $2.99 per month and supports features such as organizing saved tweets and undoing sent tweets.