GameStop millionaire makes huge bet on battered airline
Hey, remember the meme stock craze?
It may seem like eons ago, but the financial frenzy only dates back to 2021, when Reddit users in the r/Wallstreetbets forum generated tons of hype about struggling video game retailer GameStop (GME) , which was being heavily shorted by hedge funds.
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Other stocks, including AMC Entertainment (AMC) , Blackberry (BB) , Nokia (NOKBF) , and Bed Bath & Beyond--which later went out of business--soon joined the wild bunch.
"Posters engaged in bombastic exchanges, claiming to have made spectacular returns making bets on stocks that seem unmoored from realistic assessments of the companies’ business models or their fundamentals," according to an article in the Southern California Law Review.
"Beyond boasting about eye-popping returns, users of the r/Wallstreetbets board were able to express their idiosyncratic likes and dislikes about the business model or customer services of the video game or movie theater companies," the publication said.
The law review added that social media platforms like Reddit “represent a digital disruption that has allowed retail investors to exchange notes not just about their trading exploits, but also their expressive preferences about firms in a group setting.”
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JetBlue investor 'really impressed' with CEO
Vladimir Galkin was paying close attention to all that digital disruption during the meme stock madness.
A Florida-based investor, Galkin partly built his fortune through GameStop shares during that time.
Related: Billionaire Carl Icahn just bought nearly 10% of popular airline
Now Galkin, who cofounded and owns a majority stake in HUBX, an online global marketplace for wholesale electronics, has set his sites and money on JetBlue (JBLU) .
Galkin's stake in the air carrier is close to 10% and he in an interview with Bloomberg said he met with JetBlue CEO Joanna Geraghty and Chief Financial Officer Ursula Hurley and raised the possibility of joining the board “at some point.”
“I have not decided whether I want to become a director,” he said. “Any consideration would, of course, require further discussions with the board and adhering to their nominating process.”
This has been a somewhat turbulent year for JetBlue.
In March, the company and Spirit Airlines (SAVE) announced they were scrapping their proposed $3.8 billion merger after a federal judge blocked the deal, saying it would hurt consumers who depend on Spirit’s lower fares.
Geraghty has detailed plans to pull out of some cities and delay $3 billion in new aircraft purchases to help control persistently high costs.
Galkin said he was “really impressed” by Geraghty and her team's progress this year.
He said the CEO didn’t make any board commitment in their conversation and encouraged him to speak with the nominating committee as required by the company’s bylaws.
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Galkin was also impressed with when JetBlue gave legendary activist investor Carl Icahn a pair of board seats after the investor took a stake of nearly 10% earlier this year.
JetBlue off to 'solid start,' top executive says
In a regulatory filing, Icahn said he bought JetBlue shares because he believed they were “undervalued and represented an attractive investment opportunity.”
The filing also said that he intended to continue discussing the possibility of board representation with JetBlue's management and board members.
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Galkin said he liked to bet big on stocks attracting activists like Icahn.
Although he’s never discussed JetBlue with Icahn, Galkin said he's "had good fortune having followed activist investors before.”
"They work out great," he said.
Galkin said that he would hold his JetBlue investment to below 10% since reaching a 10% stake triggers additional disclosure requirements and would allow him to call for a special shareholder meeting. He would also be considered an insider.
In a statement to Bloomberg, JetBlue said it “regularly speaks with shareholders and investors to listen to their views on the company’s strategy and progress.”
A spokesman declined to comment on discussions with individual shareholders.
JetBlue shares finished down 1.7% at the last check, and the stock is off 4.5% year to date and 10% from a year ago.
Meanwhile, the company raised its third-quarter revenue forecast on Sept. 5, citing such factors as strong summer travel and improved operations.
JetBlue said it also received a boost from customers from rival airlines who were affected by the July CrowdStrike (CRWD) IT outage, which caused thousands of flight delays and cancellations.
The air carrier said it now expects September-quarter revenue in the range of a 2.5% decline to 1% growth year-on-year, according to a regulatory filing. It had earlier forecast revenue to drop somewhere between 1.5% and 5.5%
The new guidance prompted TD Cowen to raise the firm's price target on JetBlue to $6 from $5 while maintaining its hold rating on the shares.
The firm said management now anticipates better revenue production in the quarter and cost relief due to favorable jet fuel pricing and execution on non-fuel cost initiatives.
In July, JetBlue beat Wall Street's second-quarter earnings expectations, reporting adjusted earnings of 8 cents per share on revenue of $2.43 billion. Analysts had been calling for the company to post a loss of 13 cents per share on $2.4 billion in sales.
"We've made significant investments to improve our reliability and deliver more of our customers to their destinations on time despite summer challenges from weather and persistent air traffic control staffing issues," Geraghty told analysts during the company's earnings call.
"Though we still have room to improve, we are off to a solid start," she said.
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