Connect with us

News

Boom in US penny stock trading prompts warnings of frothy markets

Published

on

Boom in US penny stock trading prompts warnings of frothy markets

Unlock the Editor’s Digest for free

A scrap metal merchant and an electric vehicle maker that has sold just four cars top the list of so-called “penny” stocks that are out-trading the likes of Tesla and Apple, prompting some analysts to warn that markets are becoming overheated.

Seven of the top 10 most traded US equities in May, as measured by the number of shares bought and sold, are penny stocks worth less than $1, according to Cboe Global Markets. None of the companies are profitable.

The huge volumes in so many little-known stocks suggest a renewed appetite among retail investors for cheap names in which they believe they can quickly make a lot of money.

Advertisement

“When markets get frothy, the speculative froth often hits penny stocks as well — this is a classic sign of market peaks,” said James Angel, a finance professor at Georgetown University.

“Penny stocks tend to be extremely volatile, so you can make or lose a ton of money very quickly,” he added. “That appeals to the speculative urge.”

The frenetic trading comes after a strong rally in US blue-chips over the past seven months, with tech stocks reaching a new record high this week, although on Friday the benchmark S&P 500 index recovered from early lows, but still suffered its first weekly decline in more than a month.

Scrap metal merchant Greenwave Technology Solutions, whose website proclaims “scrap is the new precious metal”, topped the leaderboard for May. It has 588mn shares outstanding, and a daily average of 510mn shares were traded during the month, according to Cboe Global Markets data.

Over that time, its market capitalisation swung between $4mn and $159mn and the value of its shares from 4 cents to 16 cents. The company did not respond to a request for comment.

Advertisement

The only large-cap company to make the top 10 most-traded was Tesla, a regular favourite among active traders. 

While, in value terms, trading in penny stocks is a tiny fraction of the turnover of mega-caps, investors’ increased interest has coincided with a resurgence in so-called “meme” stocks such as retailer GameStop and cinema chain AMC, which benefited from frenzied retail investor interest in 2021. 

AMC was the sixth most-traded US stock in May with volumes more than 7 times their recent average.

“Penny stocks are not the same as the meme stock phenomenon, but let’s say they rhyme. It’s people willing to put fundamentals aside and chase returns,” said Steve Sosnick, chief market strategist at retail broker Interactive Brokers. 

Sosnick’s own weekly scan of the most-traded stocks on Interactive Brokers’ platform has recently thrown up several lesser-known microcap companies.

Advertisement

“It’s emblematic of what I consider to have become a very frothy market,” he added.

Stocks that trade under $1 for a certain period are at risk of being delisted by exchanges and, for that reason, institutional investors tend not to touch them.

The rise in volumes has reawakened concerns about the impact of their financing methods on shareholders as well as the rules that allow them to remain listed. 

Several of the most traded stocks by volume in May have sold new shares recently. The deals, typically in the form of bonds that convert into stock at a discount to the market price, dilute existing shareholders and swell trading volumes when the new shares are resold, which often happens quickly.

Electric vehicle maker Faraday Future Intelligent Electric was the second-most-traded stock in May. Its 2023 accounts, filed this week after a delay due to staffing issues, showed sales of four cars and leases for a further six since a long-delayed launch last year. They also contained a warning that “it will likely file for bankruptcy protection if it is unable to access additional capital”.

Advertisement

Several posts on social media platform Reddit focused on the wild swings revealed in Faraday’s share count. This has soared from 57mn in November to 1.4bn by February, when it did a so-called “reverse split”, swapping three existing shares for one new one. Its latest filing shows 440mn shares outstanding.

Reverse splits have become a common tool for sub-dollar companies as a way of boosting share prices and warding off the threat of delisting. There are 471 companies currently with shares trading under $1 in the US, according to S&P Global Market Intelligence data, up from 125 a year ago.

More than 70 reverse splits have been announced so far this year, according to data provider Wall Street Horizon. The number of such share swaps roughly doubled in 2023 to 219 compared with the previous year despite a major rally in stock markets after a tough 2022.

Greenwave announced a 1-for-150 reverse split this week, effective from Monday. Faraday Future, which is still behind with its financial filings and whose shares have halved since it published its 2023 accounts, has appealed against a delisting decision by Nasdaq.

“The company expects its securities to continue to trade on Nasdaq in the normal course during the pendency of the hearing process,” it told the Financial Times.

Advertisement

News

Wheelchair curler Steve Emt’s path from drunk driver to three-time Paralympian

Published

on

Wheelchair curler Steve Emt’s path from drunk driver to three-time Paralympian

American Steve Emt competes in Sunday’s mixed doubles match against Italy, which the U.S. won.

Maja Hitij/Getty Images


hide caption

toggle caption

Advertisement

Maja Hitij/Getty Images

Anyone watching the Winter Paralympics has probably taken note of Steve Emt, who — along with Laura Dwyer — is representing Team USA in the Games’ first-ever mixed doubles event.

Their performance is one thing: The pair notched three dramatic, back-to-back wins in the round-robin tournament to reach the semifinals, marking the first time the U.S. has qualified for a medal round in wheelchair curling since the 2010 Paralympics.

After losing to Korea in the semifinals, Emt and Dwyer will face Latvia in the bronze medal match on Tuesday, in the hopes of winning the U.S. its first Paralympic medal in wheelchair curling.

Advertisement

But it’s their teamwork and attitude on ice that really set them apart. Emt, in particular, has charmed the internet, with his booming baritone delivering a steady stream of encouragement to his doubles partner and demands to the granite stones they’re sliding (“curl!” “sit!”).

“I have three older siblings. I was always on the basketball court getting beat up by them, so I had to assert myself on the court, around the kitchen table, everything,” he said when asked about his deep voice this week.

Steve Emt and Laura Dwyer celebrate during a match this week.

Steve Emt and Laura Dwyer have made sure to celebrate their wins, of which there have been many throughout this wheelchair curling mixed doubles round-robin tournament.

Maja Hitij/Getty Images


hide caption

Advertisement

toggle caption

Maja Hitij/Getty Images

While Emt, 56, is competing in a new event, he’s no stranger to the sport: The 10-time national champion and three-time Paralympian is the most decorated Paralympic curler in U.S. history.

But he didn’t know what curling was until he got recruited off the street just over a decade ago.

Advertisement

Emt, who is 6 feet, 5 inches tall, was enjoying a day in Cape Cod, Mass., in 2013 when a stranger with slicked-back hair approached and asked if he was local. Emt replied that he lived in Connecticut and suspiciously asked why.

“He said, ‘Well, I train with the Paralympic rowing team here in the Cape. I saw you pushing up the hill back there. With your build, I could make you an Olympian in a year,’” Emt recalled, referring to his wheelchair. “And I heard ‘Olympics,’ I’m like: Let’s go. What the hell is curling?”

After their conversation, Emt drove home and did some research, confirming that curling was not related to weightlifting, as he originally suspected.

“I went back two weeks later and I threw my first stone, and it just bit me,” he said.

Before long, Emt was making the two-and-a-half-hour drive to Massachusetts to spend the weekend training with that stranger-turned-coach, Tony Colacchio. He made the U.S. wheelchair curling team in 2014 and competed at his first world championship in 2015. Emt made his Paralympic debut in Pyeongchang in 2018, five years after that fateful encounter.

Advertisement

Emt, speaking to reporters in October, said the sport of curling has changed him as a person, mellowing him out. But the existence of the sport as a competitive outlet for athletes with disabilities changed his life.

Emt had been an all-star high school athlete, an Army West Point cadet and a UConn basketball walk-on before a drunk driving incident paralyzed him from the waist down at 25 years old.

“I’m a jock … I need to compete, and I didn’t have anything going on in my life,” Emt said. “Seventeen years after my crash, I had a hole, and then [Colacchio] came along and stalked me into the sport.”

By that point, Emt had spent years working as a middle school math teacher, a high school basketball coach and a motivational speaker. The latter has been his full-time job for almost a decade, taking him to over 100 schools across the country each year. He tells those teenagers about the chance Colacchio took on him, encouraging them to “be a Tony.”

“Go sit with that kid at lunch that’s sitting alone … smile [at] somebody in a hallway, get your heads out of your phones, get your heads out of the sand,” he continued. “We’re all going through something … and a simple ‘hello’ or ‘good morning,’ it could change their day. It could change somebody’s life.”

Advertisement

Why Emt now shares his story 

This is the third Paralympics for Emt, who is already eyeing Salt Lake City 20

This is the third Paralympics for Emt, who is already eyeing Salt Lake City 2034.

Mattia Ozbot/Getty Images


hide caption

toggle caption

Mattia Ozbot/Getty Images

Advertisement

Emt wasn’t always so willing to open up. For the first half a year after his 1995 crash, he told everyone a deer had run in front of his car rather than admit he had gotten behind the wheel drunk.

“I was lying to myself, I was lying to everybody around me,” he said. “I didn’t want kids to look at me in my hometown, in the state, and everyone around the country, as a drunk driver. I wanted them to look at me as a stud athlete and a great person.”

Emt had been a “stud athlete”: His talents in high school basketball, soccer and baseball made him a star in his hometown of Hebron, Conn., and earned him a spot on the basketball team at West Point.

But he dropped out two years later, after his father’s sudden death from a heart attack. He went home to Connecticut and eventually enrolled at UConn, where he walked on to its storied basketball team, joining future NBA greats like Donyell Marshall. Emt says, with a chuckle, that he had 38.7 seconds of playing time in his two years.

Advertisement

Emt was wearing his Big East championship jacket the night of his 1995 accident, which he says left him for dead on the side of the highway. When he woke up from a coma a few days later, he learned he would never walk again.

And he didn’t want to tell people why, until a newspaper reporter approached him six months later wanting to tell his story — and encouraged him to be honest. He said the opportunity to “come clean” helped him accept what he’d done and forgive himself.

“That’s my label: Yeah I’m a curler, yeah I’m a speaker, yeah I’m a drunk driver,” he said. “I’m in a wheelchair because of a drunk driving crash, and I want you to know it and I want you to learn from me.”

Emt first got into motivational speaking about eight months after his accident, and has been doing it ever since. He calls it his therapy.

He says that and curling — which is about shaking hands with competitors instead of smack-talking them — has helped him slow down and appreciate the little things. Relocating to Wisconsin and the chiller pace of Midwest life has also helped. And he says he cherishes the platform that curling has given him.

Advertisement

“I want people to know: ‘Hey, when you’re ready to talk, I’m here for you.’ This is what I do, from my speaking to my curling, whatever it is, there are so many opportunities to be successful again,” he said. “When you wake up and you’re told you’re never going to walk again, it’s like, what do I do now? … And I just want people to know that there are so many avenues out there, so many things to do.”

Emt, the oldest Paralympian on Team USA, originally aimed to make it to three Games. But he’s now eyeing even more, as he’d like to compete on home turf in Salt Lake City in 2034 (two Games away).

“I’m going to be like 90 years old competing at the Paralympics,” he laughed.

Continue Reading

News

Map: 2.3-Magnitude Earthquake Reported North of New York City

Published

on

Map: 2.3-Magnitude Earthquake Reported North of New York City

Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Eastern. The New York Times

A minor, 2.3-magnitude earthquake struck about 12 miles north of New York City on Tuesday, according to the United States Geological Survey.

The temblor happened at 10:17 a.m. Eastern in Sleepy Hollow, N.Y., data from the agency shows.

The Westchester County emergency services department said in a statement that it had not received any reports of damage.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

Advertisement

Source: United States Geological Survey | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Eastern. Shake data is as of Tuesday, March 10 at 10:30 a.m. Eastern. Aftershocks data is as of Tuesday, March 10 at 2:18 p.m. Eastern.

Continue Reading

News

Ed Martin, outspoken Justice Department lawyer, is formally accused of ethical violations | CNN Politics

Published

on

Ed Martin, outspoken Justice Department lawyer, is formally accused of ethical violations | CNN Politics

Ed Martin, an outspoken Trump administration official, is facing attorney discipline proceedings in Washington, DC, for a letter he sent to Georgetown Law about its diversity programs, the district’s professional conduct investigator announced on Tuesday.

Martin is formally accused of violating his ethical codes as an attorney for telling Georgetown Law’s dean last year that his Justice Department office wouldn’t hire students because of the school’s diversity, inclusion and equity initiatives programs, according to the filing from Hamilton Fox, the disciplinary counsel for DC who acts as a quasi-prosecutor on attorney discipline matters.

Unlike unsolicited complaints, Fox’s formal disciplinary complaint kicks off professional conduct proceedings for Martin in which he will need to respond and could be sanctioned or ultimately lose his law license.

Fox’s announcement on Tuesday marks the first major bar discipline proceeding against a high-profile administration official or attorney supporting President Donald Trump during Trump’s second term. Several Trump lawyers faced disciplinary proceedings after the efforts to overturn Joe Biden’s victory in the 2020 presidential election, including Rudy Giuliani, who lost his law license.

“Acting in his official capacity and speaking on behalf of the government, he used coercion to punish or suppress a disfavored viewpoint, the teaching and promotion of ‘DEI,’” Fox wrote in the complaint. “He demanded that Georgetown Law relinquish its free speech and religious rights in order to continue to obtain a benefit, employment opportunities for its students.”

Advertisement

Martin was removed from the top prosecutor job in DC after senators made clear he would not be confirmed to the role, but has remained at the Justice Department in several roles, including as pardon attorney.

“Mr. Martin knew or should have known that, as a government official, his conduct violated the First and Fifth Amendments to the Constitution of the United States,” Fox wrote.

Martin is being represented by a Justice Department attorney, a source told CNN.

A spokesperson for DOJ attacked Fox’s complaint. “The DC bar’s attempt to target and punish those serving President Trump while refusing to investigate or act against actual ethical violations that were committed by Biden and Obama administration attorneys is a clear indication of this partisan organization’s agenda,” DOJ said.

Martin had sent the letter to Georgetown Law while serving temporarily as US attorney for DC, a prominent Justice Department position, and told the school his federal prosecutors’ office wouldn’t hire Georgetown’s law school students. It came at a time when the Trump administration was beginning to crack down on universities for their DEI efforts.

Advertisement

In his letter, Martin claimed a whistleblower told him that the school was teaching and promoting DEI.

Martin also violated attorney ethics rules by contacting judges of the DC court directly, Fox alleged, rather than going through official channels, once he was informed he was under investigation for his professional conduct. The DC Court of Appeals ultimately signs off on attorney discipline findings.

Early last year, Fox’s office had formally asked Martin to respond to a complaint it received by a retired judge regarding the Georgetown letter.

Martin instead wrote to the judges on the DC court complaining about Fox.

“In that letter, he stated that he would not be responding to Disciplinary Counsel’s inquiry, complained about Disciplinary Counsel’s ‘uneven behavior,’ and requested a ‘face-to-face meeting with all of you to discuss this matter and find a way forward,’” Fox wrote.

Advertisement

“He copied the White House Counsel ‘for informational purposes because of the importance of getting this issue addressed,’” Fox said.

The top judge in the DC courts told Martin the court wouldn’t meet with him about the disciplinary matter and that he would need to follow procedure.

With Fox’s complaint, there will now be several steps ahead of bar discipline authorities looking at Martin’s action, and Fox didn’t specify how Martin should be reprimanded or punished if the discipline boards and the court ultimately determine he violated his ethical codes.

Spokespeople for the Justice Department didn’t immediately respond to requests for comment on Tuesday morning.

In recent days, Attorney General Pam Bondi announced her office would have a more powerful role in reviewing attorney discipline complaints against Justice Department attorneys, potentially setting up an approach that could keep the department at odds with the bar on behalf of DOJ attorneys facing their own individual disciplinary proceedings.

Advertisement

CNN’s Paula Reid contributed to this report.

Continue Reading

Trending