The latest down-and-out company to see a sudden surge in its stock price is none other than BlackBerry, the once darling maker of smartphones including the BlackBerry Classic.
The company, which once controlled 50 percent of the U.S. smartphone market and saw its phones referred to as “CrackBerry,” has since exited the smartphone market and now primarily makes enterprise software services. The company generated just under $1 billion in sales last year, a far cry from its peak of $20 billion in 2011.
David v Goliath —
But Redditors have chosen a lot of floundering companies to bet on during the pandemic, starting with GameStop and moving on to other companies like AMC, which has seen its market cap rise 3,000 percent so far this year, putting it in line with companies like Delta Air Lines and Best Buy.
AMC generated just over $1 billion in revenue in 2020, a sharp decline from previous years as a result of the pandemic. But retail investors think it has strong potential to make a comeback and the company is now valued at about $25 billion.
Even if it does make a comeback, AMC made about $5 billion in the year before COVID and has $5 billion in debt on its books. That’s a big multiple for a company that was eroding and losing money even before the pandemic due to broader trends towards streaming and shortening release windows for new movies. A comparable cinema company, Cinemark, is valued at just $5 billion — and it doesn’t have all that debt.
Fundamentals —
But it’s hard to hate on the Reddit traders, who have been making money hand over fist throughout this rise against the establishment. It’s an attractive story too, one of David fighting against Goliath, in this case “sophisticated” investors who know how to make complex trades using high-speed computers and have made a killing in the past year betting against flailing companies. Now, everyday people have been able to band together and to do the same thing, moving stocks and making money doing it. There’s no wonder so many people are talking about the frenzy.
There’s at least some reasonable case to be made that BlackBerry could create a valuable business, especially in today’s world of rising cyberattacks. Its market value is just $8 billion, not totally out of the realm of possibility. But it feels like so many of these companies that Redditors are plowing money into just don’t have the fundamentals, and someone is going to get hurt when they finally come back to Earth and people begin pulling out.
