The Week in Business: GameStop’s Bizarre Saga

By Patricia A. Eldridge 4 years ago

Hi, everyone. Here’s your breakdown of the top news in business and tech, so you’re ready for the week ahead. — Charlotte Cowles

Who could have predicted that the struggling video game retailer GameStop would hijack markets and cause a Wall Street meltdown? The company’s stock soared an absurd 1,700 percent this month, but not because the company did anything new or special. Instead, it became the focus of hordes of amateur traders — also known as retail investors — who banded together on Reddit message boards and drove up GameStop’s stock price by buying tons of its shares through apps like Robinhood and E-Trade. They adopted similar tactics with underdogs like AMC Entertainment, BlackBerry and American Airlines, inflating their stock prices, too. In doing so, they squeezed big Wall Street firms that were betting against the companies, forcing them to take huge losses.

All bubbles burst eventually, but the question is when. GameStop’s stock began to deflate — temporarily — on Thursday after Robinhood and similar apps placed restrictions on trading it. The crackdowns steadied markets but attracted criticism from lawmakers who accused the apps of kowtowing to Wall Street hedge funds. GameStop’s investors weren’t happy, either, and the backlash pushed Robinhood to reverse its decision and reopen “limited” trading a day later. The takeaway: Now that trading apps allow millions of regular people to buy stocks quickly and easily from their living rooms, this probably won’t be the last time they gang up on Wall Street.

The latest report from the Commerce Department confirmed what you could have probably guessed: 2020 set a record for the country’s worst economic decline in a calendar year, by at least one measure. Gross domestic product rose just 1 percent in the final quarter, a sharp slowdown from the previous three months. Economists attributed the end-of-the-year fizzle to waning fiscal support from the federal government and the resurgence of coronavirus cases over the holidays, which resulted in more business closings and lockdowns. But analysts also believe that the country’s comeback will be steadier in 2021, with more government stimulus on the horizon and vaccine distribution underway.

Better make sure your garage has ample outlets. General Motors has pledged to phase out gas-powered vehicles and switch entirely to cars and trucks with zero tailpipe emissions by 2035. It’s part of the company’s plan to become carbon neutral by 2040, one of the most ambitious goals in the auto industry. The move sets a higher standard for other automakers to follow, and may embolden the Biden administration to push for even more aggressive policies to encourage companies to fight climate change.

Leon Black, the chief executive and chairman of Apollo Global Management, one of the world’s biggest private equity firms, said he would step down from his executive role by July after revelations that he paid more than $150 million to the convicted sex offender Jeffrey Epstein. Mr. Epstein committed suicide in jail more than a year ago while facing federal sex-trafficking charges, but many of his former associates remain tainted by proximity. An investigation found that Mr. Black’s payments were compensation for Mr. Epstein’s business advice. They also explain how Mr. Epstein was able to bankroll at least part of his extravagant lifestyle.

The Big Four tech giants faced fresh scrutiny and legal threats from antitrust watchdogs in the past few months, but will that hurt their growth? Probably not, but we’ll find out more when Amazon and Alphabet, Google’s parent company, report their latest earnings this coming week. Facebook’s profits jumped a whopping 53 percent in the most recent quarter, even as the company fought a major lawsuit filed by the Federal Trade Commission in December (and kicked former President Donald J. Trump off the platform, driving away many of his supporters as a result). And Apple’s new iPhone 12 led to a 21 percent increase in sales, pushing the company past $100 billion in quarterly revenue for the first time.

President Biden’s pick for Treasury secretary, the former Federal Reserve chair Janet Yellen, was confirmed and sworn in. The Walgreens Boots Alliance has named Rosalind Brewer, now the chief operating officer at Starbucks, as its next chief executive, making her the only Black woman to currently run a Fortune 500 company. A small painting by Botticelli fetched $92.2 million at auction at Sotheby’s, a sign that the world’s wealthiest are still willing to shell out for fine art.

And finally …

Has the pandemic forced one of your favorite local businesses to close? Tell us about it, here. We’re collecting stories about special neighborhood establishments that had to shut down this past year, and what that loss has meant.

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