Retail investors are (still) re-shaping the markets one year after the GameStop trading frenzy
Let’s take a dive into the Fortune archives today.
There are about 20 minutes to go before the stock market closes, and I’m standing next to 24-year-old Adam Mesh in the sprawling offices of Tradescape, a Manhattan day-trading firm. “Hey, check out PLUG,” Mesh yells out. Overhead, on one of Tradescape’s ubiquitous TV monitors, CNBC’s Joe Kernen is talking up Plug Power, a fuel-cell company that Mesh and the other twentysomething traders here have never heard of before today.
On his multicolored computer screen, Mesh is watching PLUG, already up $15 to $53, suddenly begin to surge again. He jumps in, buying 500 shares at $55. About a minute later he gets out at $58. But PLUG is still soaring, so Mesh gets back in, this time at $60. I look around at the other traders squeezed shoulder to shoulder in Tradescape’s offices, and on every screen the ticker PLUG is flashing, its shares furiously moving higher.
“What the heck is this company?” I ask. “It’s PLUG,” Mesh says. Yeah, I know that much. But what does it do? “I don’t know,” Mesh responds, without looking up. “Power, I guess.” I decide to let the issue drop, and with PLUG now about to close at $79, the question of what the company does seems pretty irrelevant. In a rapid bout of buying and selling, Mesh trades nearly 10,000 shares of PLUG in the few minutes I stand behind his desk, making $20,000 in the process. It’s been a good day for Mesh, but for some traders it’s been even better. “I made a honey,” one guy calls out, using trader slang for $100,000. “Can you believe this?”
Clad in a scruffy old T-shirt and in desperate need of a shave, Mesh is an unlikely mascot for the new world of Wall Street. But at a time when day traders, Internet message-board prowlers, and plain old folks with Ameritrade accounts are increasingly driving the action, it’s Mesh—not Peter Lynch or Warren Buffett—who typifies today’s investor. They’re the ones who are moving the stocks that you hear about on CNBC and at cocktail parties, those names that jump 20% a day, sometimes 200%.
That is the first few grafs of a feature written, not in 2021, as you could fairly assume (absent mention of “PLUG” and “Ameritrade”), but in February 2000. A friend sent me an archived link to this about three months after the GameStop trading frenzy that threw Wall Street for a loop. “Written 21 years ago,” he wrote to me. “Eerily similar.”
The trading saga that ignited a House committee hearing took place exactly one year ago today, January 27, when hedge fund short sellers were forced to close their positions in GameStop when it was trading up 685% from the beginning of the month. The ordeal revealed any number of things about the stock market, including how most people don’t know how it really works. But it was also a mainstream signal of an evolution in the reigns on Wall Street. A 22-year look-back shows that this progression has been happening for longer than most people give it credit for.
Obviously, markets have changed: Investors are the most demographically diverse we’ve ever seen before, Bitcoin exists and is trading at above $36,500, a 19-year-old with a meager balance in their brokerage account can invest in an IPO, and AMC gives its investors free popcorn.
You can’t deny the role that venture capital, private equity, and creative thinkers have played in shaping this new reality—TD Ameritrade (now under the reigns of Charles Schwab) with touch-tone phone trading, Vanguard with its unprecedented affordable mutual funds, Acorns for building retirement savings with mere pennies, or Robinhood with its commission-free trading.
Some cutting edge startups operating in the financial markets have become so successful at shunting Wall Street’s historic way of operating that legacy Wall Street is ushering some of them back into the fold with fat sums of cash in an effort to modernize and stay relevant. Yesterday, UBS—one of the largest broker-dealers in the world and one of the most-used wealth management firms among ultra-rich investors—agreed to buy Wealthfront, a digital robo advisor with a $500 minimum to open an investment portfolio, for $1.4 billion. Private equity money is pouring into independent wealth management businesses being opened by long-time financial advisors ditching the likes of Morgan Stanley or Merrill Lynch. I can’t keep up with the number of high-tech or social-focused brokerages splashing into the marketplace with millions in venture capital funding.
Of course, these companies are just legal entities operated and run by people who make choices—some of them costly and dangerous errors. We’ve seen things go swimmingly well, and devastatingly sour. But all this innovation has resulted in, or perhaps is because of, this: People want in on the markets; they also want to understand them.
Whether you call the rise of the retail investor a dumb-money travesty or democratizing finance, people have been throwing cash in a stock on its way up the charts for two decades. It’s right now that everyone has really started to pay attention.
Oh, by the way, Plug Power still exists. It’s a clean hydrogen and zero-emission fuel cell solutions provider, and it’s currently trading at under $19 per share on Nasdaq—down from a recent remarkable surge to more than $66 per share in January 2021.
A new proposal: The Securities and Exchange Commission wants to increase the information and frequency of disclosures private equity and hedge funds must report in their Form PF. For PE funds, you’d have to report the removal of a general partner or disclose a fund’s investment period ending within one business day. The proposal would also require more disclosures around how funds are using leverage. All this is an effort from the federal regulator to reduce risk in the private markets. Read more in the Wall Street Journal.
A reminder: Term Sheet is partnering with Semaphore for its 14th annual confidence survey of private equity, venture capital, hedge fund and other professionals. Will 2022 afford an end to our public health burden? Has it influenced business interests and personal income? Fifty-six percent of respondents expressed confidence in then-new president Biden last year. Is the honeymoon over? Weigh in, if you like, and share your level of confidence in yourself, the economy, and your business; it’s anonymous and should take you 3-4 minutes. You can take the survey here. Have a look at last year’s results here.
See you tomorrow,
- Fireblocks, a New York-based digital asset and crypto custody platform for custodians, fintech, crypto exchanges, lending desks, super apps and asset management firms, raised $550 million in Series E funding. D1 Capital Partners and Spark Capital co-led the round and were joined by investors including General Atlantic, Index Ventures, Mammoth, CapitalG, Altimeter, Iconiq Strategic Partners, Canapi Ventures, and Parafi Growth Fund.
- o9 Solutions, a Dallas, Tex.-based enterprise AI software platform provider for supply chain management, raised $295 million in funding from General Atlantic, Generation Investment Management, and KKR.
- Skims, Kim Kardashian’s underwear brand, raised $240 million in funding led by hedge fund Lone Pine Capital and was joined by investors including D1 Capital Partners, Imaginary Ventures, Alliance Consumer Growth, and Thrive Capital.
- Paack, a Barcelona, Spain-based e-commerce delivery platform, raised €200m ($225 million) in Series D funding led by SoftBank and was joined by investors including Infravia Capital Partners, First Bridge Ventures, Endeavor Catalyst, Unbound, Kibo Ventures, Big Sur Ventures, RPS Ventures, Fuse Partners, Rider Global, Castel Capital, and Iñaki Berenguer.
- Blockdaemon, a Los Angeles-based blockchain infrastructure company for node management and staking, raised $207 million in Series C funding. Sapphire and Tiger Global led the round and were joined by investors including SoftBank, Boldstart Ventures, StepStone Group, Matrix Capital Management, and Lerer Hippeau.
- Dremio, a Santa Clara, Calif.-based data lake transformation company, raised $160 million in Series E funding. Adams Street Partners led the round and was joined by investors including Sapphire Ventures, Insight Partners, Lightspeed Venture Partners, Norwest Venture Partners, and Cisco Investments.
- Esusu, a New York-based fintech company for rent reporting and data solutions for credit building, raised $130 million in funding. SoftBank led the round and was joined by investors including Jones Feliciano Family Office, Lauder Zinterhofer Family Office, Motley Fool Ventures, Schusterman Foundation, Related Companies, and Wilshire Lane Capital.
- Domestika, a Berkeley, Calif.-based online course from expert professionals company, raised $110 million in Series D funding led by Zeev Ventures and was joined by investors including GSV Ventures.
- CaptivateIQ, a San Francisco-based sales commission software company, raised $100 million in Series C funding led by ICONIQ Growth, Accel, and Sequoia and were joined by Sapphire.
- CoinTracker, a San Francisco-based cryptocurrency tax and portfolio tracking platform, raised $100 million in Series A funding. Accel led the round and was joined by investors including General Catalyst, Initialized Capital, Y Combinator Continuity, 776 Ventures, Coinbase Ventures, Intuit Ventures, and Kraken Ventures.
- Distalmotion, an Epalinges, Switzerland-based surgical device manufacturer, raised $90 million in Series E funding led by Revival Healthcare Capital and was joined by investors including 415 CAPITAL.
- Wandelbots, an industrial robot software company, raised $84 million in Series C funding led by Insight Partners and was joined by investors including 83North, Microsoft, Next47, Paua, Atlantic Labs, and EQT.
- PortalOne, a Palo Alto, Calif.-based hybrid games platform, raised $60 million in Series A funding led by Tiger Global and joined by investors including Talis Capital, Temasek, TQ Ventures, Signia Venture Partners, Coatue, Access Industries, Connect Ventures, and Animoca Brands.
- Kula Bio, a Somerville, Mass.-based sustainable nitrogen solutions company, raised $50 million in Series A funding. Lowercarbon Capital led the round and was joined by investors including Collaborative Fund, Grantham Environmental Trust’s Neglected Climate Opportunities Fund, and iSelect Fund.
- Leap, a Chicago-based retail-as-a-service platform for brands, raised $50 million in Series B funding led by BAM Elevate and was joined by investors including Harbor Spring Capital, Northern Trust, Simon, Costanoa Ventures, Hyde Park Venture Partners, and Equal Ventures.
- TenSixteen Bio, a San Francisco-based company leveraging somatic mosaicism and clonal hematopoiesis (CHIP) to discover and develop therapeutics to treat age-related diseases, raised $40 million in funding from Foresite Capital and GV.
- The Vets, a Miami, Fla.-based pet care services platform, raised $40 million in seed funding led by Target Global, PICO Venture Partners, and Bolt Ventures.
- Compound, a San Francisco-based tech-powered wealth management platform, raised $37 million in funding. Greenoaks and Lachy Groom led the round and were joined by investors including Silver Lake, FTX, YCombinator, XYZ, SciFi, and Day One Ventures.
- Polly, a San Francisco-based SaaS technology company for mortgage capital markets, raised $37 million in Series B funding led by Menlo Ventures and was joined by investors including Movement Mortgage, First American Financial, FinVC, 8VC, Khosla Ventures and Fifth Wall.
- Aruna, a Jakarta, Indonesia-based online fishery marketplace, raised $30 million in Series A funding led by Vertex Ventures and was joined by investors including Prosus Ventures, AC Ventures, East Ventures, Indogen Capital, SMDV, and SIG Venture Capital.
- Vesta, a San Francisco-based mortgage loan origination SaaS company, raised $30 million in Series A funding led by a16z and was joined by investors including Zigg Capital, Conversion Capital, and Bain Capital Ventures.
- DSP Concepts, a Santa Clara, Calif.-based audio development tool developer, raised $28 million in Series C funding led by Allego CEO Yuchun Lee and was joined by investors including Sony Innovation Fund, Subaru, and Porsche Digital.
- Atrium, a San Francisco-based data-driven sales management platform, raised $20 million in Series A funding led by Craft Ventures and was joined by investors including Bonfire Ventures, Bullpen Capital, and Charles River Ventures.
- DigitalOwl, a Tel Aviv, Israel-based AI software developer for analyzing insurance and legal claims, raised $20 million in Series A funding led by Insight Partners and was joined by investors including Ibex and Fusion VC.
- PQShield, an Oxford, U.K.-based cybersecurity company specializing in post-quantum cryptography, raised $20 million in series A funding led by Addition.
- TickSmith, a Montreal-based e-commerce data management company, raised $20 million in Series A funding to led by Investissement Québec and was joined by investors including Fonds de solidarité FTQ, CME Ventures, Databricks Ventures, Anges Québec, Anges Québec Capital, and Illuminate Financial Management.
- Laka, a London-based collective insurer for bike and e-bike owners, raised $12 million in Series A funding led by Autotech Ventures and was joined by investors including Ponooc and ABN AMRO Ventures.
- Woflow, a San Francisco-based data infrastructure company behind food delivery companies, raised $7.3 million in Series A funding. Base10 Partners and Construct Capital led the round and were joined by Craft Ventures.
- Diffblue, an Oxford, U.K.-based AI-for-code solution that automates writing, raised $6.4 million in funding led by IP Group Plc and was joined by Oxford University.
- Swing, a Singapore-based decentralized multi-chain liquidity aggregation protocol, raised $6 million in funding led by Republic Capital and was joined by investors including Avalanche Labs, Celer, Bitcoin.com, Morningstar Ventures, Ascensive Assets, Skynet Trading, LD Capital, and Bitmart.
- Onramper, an Amsterdam-based fiat-to-crypto gateway aggregator, raised $6 million in seed funding led by EQT Ventures and was joined by investors including Backed VC and TRGC.
- TSUMo Snacks, a cannabis snacks company, raised $4 million in seed funding led by Casa Verde.
- Iron Mountain acquired an 80% stake in ITRenew, a Newark, Calif.-based information technology asset disposition services company, for $725 million in cash. It will purchase the remaining 20% stake within three years.
- Eurazeo acquired a $200 million majority stake in Cranial Technologies, a Tempe, Ariz.-based company treating infant plagiocephaly.
- Assicurazioni Generali agreed to acquire a 25% stake in Future Generali India Insurance, a Mumbai, India-based insurance company, from Future Group for $166 million.
- KKR invested $45 million in Series C funding in GrowSari, a Manila, Philippines-based B2B e-commerce platform serving micro, small and medium-sized enterprises.
- Spectrum Equity acquired a $45 million minority stake in SavvyMoney, a Pleasanton, Calif.-based credit score platform.
- Abris Capital Partners agreed to acquire Dentstore, a Bucharest, Romania-based dental consumables and equipment distributor. Financial terms were not disclosed.
- Francisco Partners acquired a majority stake in GAINSystems, a Chicago-based cloud-based supply chain planning company. Financial terms were not disclosed.
- Worklyn Partners acquired Quadrant Information Security, a Jacksonville, Fla.-based emerging managed detection and response (MDR) provider. Financial terms were not disclosed.
- UBS agreed to acquire Wealthfront, a Palo Alto, Calif.-based robo advisor and automated financial planning platform, for $1.4 billion in cash. Investors including Spark Capital, Tiger Global, and Benchmark have exited.
- DBS Group plans to announce tomorrow it will agree to buy Citigroup's consumer finance business in Taiwan, per Reuters. A deal could be worth around $2.2 billion.
- SAP agreed to acquire a majority stake in Taulia, a San Francisco-based working capital management fintech provider. Financial terms were not disclosed.
- Tencent Holdings plans to take DouYu International Holdings, a Wuhan, China-based gaming live stream company, private with at least one other private equity firm, per Reuters.
- Till Payments acquired Ziosk Integrated Payment Services, a Dallas-Tex.-based ISV enablement Payment Facilitation program company, from Ziosk. Financial terms were not disclosed.
- PingPong, a Hangzhou, China-based payments company, is weighing a $1 billion IPO in Hong Kong, per Bloomberg.
- The company that owns WeTransfer, an Amsterdam-based file transfer platform, withdrew its IPO filing due to market volatility.
- Credo Technology Group Holding, a San Jose, Calif.-based connectivity solutions provider, and its shareholders raised $200 million in an offering of 20 million shares (8% sold by insiders) priced at $10 per share—it had previously planned to offer 25 million shares. The company posted total revenue of $58.7 million in the year ending in April 2021 and reported a net loss of $27.5 million. Celesta Capital backs the firm.
- D-Orbit, a Como, Italy-based space logistics and transportation company, agreed to go public via a merger with Breeze Holdings Acquisition Corp., a SPAC. A deal values the company at approximately $1.3 billion.
- Akili Interactive, a Boston-based digital medicine company developing cognitive treatments founded by PureTech, agreed to go public via a merger with Social Capital Suvretta Holdings Corp. I. A deal values the company at approximately $1 billion.
- Apifiny Group, a New York-based cross-exchange digital asset trading network, agreed to go public via a merger with Abri SPAC I, a SPAC. A deal values the company at approximately $530 million.
- Brand Velocity Acquisition Corp., a SPAC backed by former NFL quarterback Eli Manning, withdrew its IPO filing.
FUNDS + FUNDS OF FUNDS
- Asia Alternatives, a Hong Kong-based private equity fund-of-funds, raised $2 billion in funding across a series of funds.
- GTCR, a Chicago, Ill.-based private equity firm, raised $2 billion for its first strategic growth fund.
- ATL Partners, a New York-based private equity firm, promoted Allie Donini and Eli Exum to vice presidents.
- Newlight Partners, a New York-based growth equity investment firm, promoted Joshua Ho-Walker to partner and James Antoniotti and Kristian Hila to principals.
- Two Sigma Impact, Two Sigma’s Portland, Maine-based impact investing business, hired David Wennberg as Executive Advisor for its healthcare investing business. Formerly, he was with Quartet.