Was There a Systemic GameStop Price Manipulation?

The pandemic we are currently experiencing has created unprecedented market conditions with unpredictable results. In one of those events, seemingly out of nowhere, a company that many institutional investors were betting would end up bankrupt surged 1000% within a period of two weeks. This stirred up a frenzy of retail investors, united by the common cause against the institutional investors who had “shorted” the stock, creating a highly polarized environment with social underpinning. These events activated the reflexes of the trading mechanism’s cogs in an effort to control the irrational price action under the pretense of the “safety of retail investors.” Several brokers halted intraday trading of GameStop, allowing only the sale of the stock, but in later days slowly accepted a reduced number of shares to be traded. The majority of media outlets focused on the coordination of millions of retail investors flocking to GameStop shares, however, the brokers are currently being investigated for market manipulation.

The story, though, goes deeper. Why would a broker risk its reputation and legal sanctions to manipulate the market and keep a surging stock low? The main broker at issue is Robinhood: one of the fastest growing brokers that apparently is striving to “democratize trading” and also serves the highest market cap of traders instigating the surge of GameStop. However, the profit centers of Robinhood are relatively opaque as they advertise themselves as a zero-fee broker. The way Robinhood makes their revenue is by payment-for-order-flow (PFOF), which essentially means that they sell the market moves of the (retail) investors on its platform to interested parties, usually institutional investors. One of these institutional investors is Citadel, which constitutes 40% of Robinhood’s total revenue. Things got more complicated when Citadel invested $2bln in equity of Melvin Capital amidst the GameStop frenzy. Melvin Capital was one of the main “short” sellers of GameStop, which resulted in a 53% loss of the total value of the firm that equated with the amount Citadel invested. This points towards a conflict of interest between Robinhood, Citadel and Melvin Capital, and any regulatory action for the benefit of retail investors must take place by a regulatory authority such as the SEC.

Things got even more complicated: the CEO of Robinhood, Mr. Tenev, in an interview with Elon Musk highlighted that it was not his choice to halt trading, but rather the National Securities Clearing Corporation’s (NSCC) choice. NSCC is a corporation that serves to make clearing of orders easier and more effective, but also provides risk management to brokers. As Mr. Tenev explained, the NSCC called him at 3AM demanding $3bln in cash to be transferred to them to balance the outstanding orders and the cash collaterals. It is worth noting that Robinhood is valued at $5bln and has received $2bln in VC funds. This suggests that $3bln would be an impossible amount for Robinhood to come up with. Mr. Tenev mentioned that after negotiations and implementing the trading halt they managed to agree to $700mln.

As it seems, the story of the rise and fall of GameStop stock is complicated and demonstrated a weakness in the system. But some questions remain unanswered: can this private authority – the NSCC – enforce measures to brokers, thus moving the market at will? If so, is the individual who takes the decisions regarding the type of measures absent of conflicts of interest? How are the amounts calculated and how could they flexibly be reduced by 80%? Did executives act on the conflict of interest that arose? Retail investors that feel they were defrauded will continue to demand answers to these questions and more.

GameStop Tests Efficient Capital Market Hypothesis

As a short-selling investor, you hope that when the price does fall, you can repurchase the shares cheaply, return them to the owner, and pocket the difference. However, this trade becomes extremely risky when the share price rises. This is precisely what happened last week, as GameStop’s shares soared 1700 percent driven by a coordinated effort by retail investors to beat Wall Street at its own game. The event caught extensive media attention, not merely because GameStop’s stock price rapidly increased but because the rise did not reflect any change in GameStop’s lackluster performance. According to GME’s most recently filed 10-Q, its gross profit dropped dramatically from $1311.4 million in 2019 to $810.9 million in 2020. The company recorded a net loss of $295.8 million in the first three fiscal quarters of 2020.

This phenomenon has caused further questioning of the long-accepted efficient capital market hypothesis (ECMH). In the article “The Mechanism of Market Efficiency,” Professor RJ Gilson of Stanford Law School posited that the ECMH is “the context in which serious discussion of the regulation of financial markets occurs.” As a classic footnote of ECMH, Eugene Fama, who won the Nobel Memorial Prize in Economic Sciences in 2013, posited that “in a well-functioning market, the prices of… securities will reflect predictions based on all relevant and available information.” Thus, in a “well functioning” market, prices will “fully reflect” all “available information.” The intuition behind this theory is that the value of financial assets is determined by information. Thus, any “good” or “bad” news relevant to security will cause its price to increase or decrease, respectively. Based on how the asset prices reflect “all the available information,” the theory comes up with three different forms of ECMH: the “weak” form, the “semi-strong” form, and the “strong” form.

Under the weak form of ECMH, the current market price reflects all the past information regarding that security. Thus, if the close price of GME is $18.84 on December 31, 2020, this price should reflect all past information (for example, strong revenue growth or huge economic losses) concerning the stock. For the same reason, the weak form indicates that any short-term stock price will move in a “random walk,” given that the price will be only influenced by tomorrow’s information and tomorrow is always uncertain, so too will be the news.

Under the semi-strong form of ECMH, it further incorporates the reality that information about a security can be publicly available (e.g., the filings disclosed to the SEC, CEO’s marriage story published in the newspaper) and non-publicly available (e.g., confidentiality agreement between employer and employees). In light of the semi-strong form of the ECMH, the price of the security will reflect only all the past information plus the current publicly available information. The reason that the price is able to reflect the upcoming publicly available information is that the traders in the market are constantly seeking out value-relevant information, and in a semi-strong market, it was expected that the new publicly available information would be disseminated quickly. Thus, under the semi-strong form of ECMH, when GameStop’s price peaked at $380 per share on January 27, 2021, it resulted from a fast reflection for the surging purchase demand available to the public eyes.

The strong form of ECMH posits that the current price of a security incorporates all the past and current information regardless of whether such information is publicly available. Thus, under this form, even corporate insiders cannot benefit from insider trading. However, there is little evidence to show that the U.S. securities market is a strong form.

The U.S. capital market, such as NYSE, is deemed as either a weak market or a semi-strong market. However, it would be very much an illusion to conclude that NYSE is either a weak-form market or a semi-strong one. As a typical anomaly to illustrate the deviation, it was found that a stock will have positive current returns if it had positive returns within the past twelve months, while a stock will have negative current returns where it had negative returns within the past twelve months. This finding disobeys the rule of the weak form of the ECMH that the current price will not be influenced by historical information.

A deviation of the semi-strong form of the ECMH is the Long Island case. Long Island is a struggling ice tea company listed on Nasdaq. The company disclosed that its name would be changed to “Long Blockchain Corp.” Immediately after the announcement, its stock price soared nearly 300% before returning to the original price three months later. Compared to this over-reaction case, according to an event study of a pharmaceutical company, the company’s stock price dramatically increased after a release of positive news regarding its cancer-curing drug in the New York Times, even though the same information has already been published in Nature.

Back to GameStop, at first glance, it seems like another deviation of the semi-strong form of the ECMH. However, the lesson behind GME is that market efficiency is not a binary concept but a matter of degree. Thus, for any valuation relying entirely on market prices, it must be carefully examined whether the market is sufficiently efficient to account for the price. This is particularly the case in the current post-COVID-19 period with an extremely low-interest rate, which can trigger the “animal spirits” in investment considerations. This is likely what we have seen with GameStop.

Going Vegan Just Got That Much Easier: PepsiCo and Beyond Meat Announce Joint Venture to Increase Public Accessibility to Plant-Based Snacks and Beverages

In recent years, veganism has shifted from a fringe movement reserved for hippies, to a mainstream, oft-discussed, and arguably “trendy” diet and lifestyle choice that many food and clothing-providers happily cater to. Not only is this shift in public attitude towards veganism a result of outspokenly vegan celebrities like Ariana Grande, Paul McCartney, and Joaquin Phoenix, but also a universal moral awakening to the environmental impacts of traditional meat production in the agriculture industry, the linkages between an animal-meat-centric diet and a host of serious health complications, and policymakers’ growing focus on the obesity epidemic in the United States. Acclaimed documentaries like “What the Health” and “Cowspiracy,” both available on Netflix, have brought such issues to the forefront of the public’s collective conscience.

This shift in public morality has provoked changes in consumer demand in favor of healthier, more sustainably and ethically produced, and plant-based alternatives to both traditional animal-meat products and classically “American” snacks such as potato chips, Cheetos, and the like. In response, food and beverage giants have steadily increased their plant-based product lines, either through acquisitions of plant-focused startups or the generation of new product lines in-house. Such efforts have seen considerable support in international markets in particular – like China – where demand for vegan alternatives to animal products can scarcely be considered a recent development.

PepsiCo is the latest international food and beverage behemoth to hop on the plant-based bandwagon with its recent announcement of a joint venture with plant-based and sustainable food company Beyond Meat. Along with Impossible, Beyond Meat is one of today’s most popular providers of plant-based meat alternatives, with its wide range of products already distributed in grocers, restaurants, and fast-food chains. Until now, Beyond Meat’s marketing division has been limited primarily to social media campaigns, making its massive footprint on the food and beverage industry all the more impressive.

Beyond Meat’s distribution and marketing practices, however, are about to change and grow drastically through its new alliance with PepsiCo. In fact, hopes thereof were critical driving forces behind the health-focused newcomer’s decision to partner with a giant known for sugary drinks and products that prioritize convenience over quality. The joint venture, coined Planet Partnership, is expected to launch later this year with aims of creating a line of plant-based snacks and beverages that make nutritious alternatives widely available to a broad public, PepsiCo fulfilling its public promises of more sustainable and environmentally-friendly production practices, and encouraging consumers to make “positive choices for both people and the planet,” according to PepsiCo’s global chief commercial officer Ram Krishnan.

In response to public announcements of the joint venture, Beyond Meat’s (BYND) share price shot up 18%, while PepsiCo’s (PEP) remained effectively constant. Though some of this initial excitement in the market response has dissipated, Beyond Meat’s share price remains slightly above that which it had been immediately prior to public disclosure of the deal. While it will be interesting to see what effect, if any, the actual launch of products through the partnership has on both corporations’ share prices, the critical question will be whether this alliance has any long-term impact, directly or indirectly, on alleviating the environmental burdens on the planet caused by the agriculture industry’s hyper-focus on animal-meat production.

Redmond Renaissance: Microsoft’s Newfound Success in a Cloud-Focused World

In January 2021, Microsoft reported nearly $43.1 billion in revenue, which amounts to a 17% increase over its last quarter. This beat analyst expectations of a 10% increase and was driven by an increasing demand for cloud services, Windows licenses, and Xbox gaming during the pandemic. However, this success did not occur overnight. Microsoft’s boom was set in motion in 2014, when Satya Nadella first took over the company from Steve Ballmer and pledged to transform Microsoft from a company focused on Windows and personal computing to a diversified services and devices company more akin to Google than to Apple. At the time, Microsoft’s Nasdaq shares were hovering around $40, and Redmond was still reeling from a shaky Windows 8 launch and disappointing sales of Windows Phones. Under Ballmer, Microsoft had doubled down on adapting Windows to all devices and even selling Microsoft-branded hardware, such as Surface tablets and Nokia phones. However, its approach backfired as enterprise and home customers found Windows 8’s touch-centric features and controversial removal of core features (such as the Start Menu) confusing to navigate. Mobile customers also continued to gravitate to Apple’s iOS and Google’s Android because of their more robust ecosystem of apps, services, and accessories.

To say that Nadella fundamentally reshaped Microsoft’s strategy is an understatement. In his first five years, he replaced Redmond’s sputtering Windows-centric business with a diversified focus on cloud services that would allow Microsoft to survive the mobile industry’s eventual elimination of the Windows operating system monopoly. To that end, he doubled down on engineering investments in Microsoft’s Office platform and improved the user interface and cloud accessibility of documents and storage. He added classroom and team management software to Office’s portfolio and adopted a platform-agnostic model to ensure Android, iOS, and macOS users equal access to Microsoft’s productivity applications. And Nadella made a bet on Microsoft’s most important product of the 2010s: its Azure cloud platform. By directing money into server technology innovation, Microsoft morphed Azure from a side project into a behemoth cloud platform that could host content for billions of devices and websites. Azure is now second only to Amazon Web Services in users. And as more services from fitness classes to schools move online in the pandemic, Azure and Office 365 now account for $16.7 billion in revenue for Microsoft—nearly 34% higher than the earlier year.

Nadella’s bet on a diversified Microsoft has also paid dividends for its other core businesses such as Windows, Xbox, and Surface. By listening to what its core enterprise and enthusiast customers wanted instead of forcing user-unfriendly designs, Microsoft fixed most of Windows 8’s shortcomings with Windows 10, which saw the reintroduction of the Start Menu, streamlined settings and notifications panels, and frequent updates that transformed Windows into more of a service than an operating system. A similar mindset focused on user feedback aided Microsoft in retooling new versions of its Xbox and Surface tablets with better performance per price. As a result, Xbox revenues climbed 14% to $15.1 billion in early 2021 and Surface revenue increased 37% to $1.5 billion in 2020.

Redmond’s shift away from a Windows-centric business to a diversified cloud-focused model has resulted in record growth and decisive success, as Microsoft’s shares are now trading well above $200. With Nadella at the helm and more businesses turning to cloud platforms to conduct business amid a global pandemic, Microsoft’s wise decisions over the past decade will continue to set the foundation for its renaissance.

Valentine’s Day: Flowers Replaced with Fraud?

2021 Valentine’s Day celebrations are not immune to the permeating effects of the pandemic, especially in light of the Covid-19 surge in romance scams. Fraudsters are taking advantage of the heightened use of dating apps and the legitimate barriers to in-person dating in order to carry out their scams. Scammers develop a virtual relationship, strengthen the connection while unsuspiciously avoiding in-person meetups, and eventually make credible requests for money before disappearing. The conditions created by the pandemic “are ripe for such fraud.”

As people spend more time online, feel more reliant on dating apps, and have more convincing reasons for monetary requests (e.g., medical bills), romance fraud has flourished. The Federal Trade Commission reports that consumers lost over $300 million to romance scams in 2020, which represents a stark increase from the year prior (51%).

The FBI is warning the public to be on high alert of these prolific scams in the wake of Valentine’s Day, cautioning: “never send money to anyone you don’t know personally.” Further, the FTC is emphasizing the crucial role that companies play in protecting their consumers. It is the responsibility of “companies bound by anti-money-laundering rules to report suspicious activity,” and to adjust systems to adapt to the new tactics employed by fraudsters.

One such example of company intervention is Western Union Co. To remedy criminal and civil charges brought against the money-transfer company—for failing to effectively police customers who were using its services to engage in fraud—Western Union has significantly improved its monitoring technology, leading to a stark decrease in reported romance scams.

It is crucial for companies to stay ahead of fraudsters’ evolving tactics through data analytics tools and other technological safeguards, however Western Union’s competitors also highlight the need for customer outreach and education. Not only has the pandemic created an increased reliance on, and normalcy around, online relationships, but it has also increased people’s “loneliness, isolation, and vulnerability.” Companies must recognize that people tend to be gullible in the face of loneliness and opportunity for romance and promptly inform victims of a potential for fraud to which they might be blind.

Regulators warn that scammers will be especially active as people are looking for love this Valentine’s Day. A study warns that the implications of such scams is far greater than a one-time monetary hit: the fraud usually continues after the original scam, and importantly, the emotional harm to the victim can be more harmful than the monetary loss.

Both companies and consumers need to be on high alert in proximity to Valentine’s Day, as the holiday provides scammers with yet another opportunity to strike. Shakespeare might tell us “love is blind,” but this year, we must all keep our eyes wide open to the reality of scammers.

Musk’s Support for Bitcoin and the Future of Cryptocurrency

Last Monday, Tesla Inc. revealed that it invested $1.5 billion worth in bitcoin. Tesla also announced its plan to “begin accepting bitcoin as a form of payment” for products in the future. According to the filing with the Securities and Exchange Commission, Tesla’s bitcoin investment intended to “diversify and maximize returns on [its] cash that is not required to maintain adequate operating liquidity.” 

In recent weeks, bitcoin prices have surged, and Elon Musk’s outward support for bitcoin on Twitter seemingly boosted the price 20% higher. The price of bitcoin has increased almost 67% this year since January 1, indicating that the company’s investment may be on the path of lucrative return. 

However, Musk’s decision raised many eyebrows. Cryptocurrencies are not cash or equivalents for accounting purposes, and are instead considered an intangible asset. The value of cryptocurrencies cannot be written up until they are sold. Conversely, they must be written down as an impairment loss if the price decreases. Tesla conceded that there is the risk that the values of the digital assets “decrease relative to [the] purchase prices,” which may harm their financial condition, given the “highly volatile” nature of  digital assets. 

Yet, the recent trend of investors betting on bitcoin has been supported by more than just Tesla. Companies like PayPal Holdings and Robinhood Markets Inc. have also decided to allow their customers to purchase and sell bitcoin. PayPal announced in early 2021 that it plans to expand options for buying or selling with bitcoin so that users may use bitcoin to purchase from any of the 28 million merchants on the platform. On Thursday, America’s oldest bank, the Bank of New York Mellon Corp., also joined the cryptocurrency market, adding to the increasingly popular trend of digital assets and cryptocurrency. Some investors find bitcoin attractive because of its decentralized system, which allows for transactions that are not controlled by any government or company. 

Musk has asserted that he believes that bitcoin “is on the verge of getting broad acceptance by conventional finance people,” but this optimistic outlook stands in contrast with the skepticism of many other bankers and regulators. Currently, the U.S. has no rules for digital assets that are accepted by the generally accepted accounting principles (GAAP). In October, the Financing Account Standards Boards unanimously voted that it would not add cryptocurrencies to its standards. Some bankers have even pointed out issues regarding illicit bitcoin and cryptocurrency financing. Others have highlighted the potential environmental implications of cryptocurrency, which ironically works against Tesla’s environmental image and company values. In general today, cryptocurrency uses are still limited, often to high-end purchases, and are not readily accepted by most merchants. 

The novelty of bitcoin and its particularly limited and volatile nature leave many critics doubtful. While there is a belief that Tesla’s investment in bitcoin will cause other companies to follow its lead, as some companies have already done, it may be better to err on the side of caution for now.

The Game-changing GameStop Short Squeeze

In late January, huge spikes in the stock price of GameStop, a struggling videogame retailer, grabbed the attention of the financial world. GameStop’s stock price has fluctuated between $20 per share to nearly $400 per share throughout the last month, amounting to a dramatic swing of over $20 billion in the company’s market capitalization. What made these volatile stock price movements unique was their catalyst: a group of retail investors communicating on platforms like Reddit, Twitter, and Discord were driving the stock price up and executing a short squeeze, thereby inflicting financial harm on hedge funds that had bet against the company.

Over the last year a number of prominent hedge funds aggressively built up short positions in GameStop, eventually leading to it being the most shorted equity in the world. Shorting a stock occurs when someone (a short seller) borrows shares of stock from another investor. The short seller then sells the stock at the current price with the expectation that the price will fall, allowing the short seller to later purchase the stock at a lower price and sell it back to the original investor at a profit. In other words, it’s a mechanism by which an investor can bet that a company’s stock price will decline.

When a large group of retail investors – primarily through the Reddit forum r/WallStreetBets – identified the large volume of short positions in GameStop, they began buying shares and orchestrating a “short squeeze.” A short squeeze is when the price of a heavily shorted stock increases, thus causing short sellers to purchase shares in order to minimize their losses. This subsequently creates a feedback loop that drives the stock price increasingly higher. In short (no pun intended), r/WallStreetBets successfully executed a short squeeze. As the company’s stock price skyrocketed, some of the large hedge funds that had shorted GameStop lost over 50 percent of their funds.

Many commentators, regulators, and politicians have questioned the legality of the Redditors’ online behavior and its effect on the broader market. When the price of GameStop stock was at its most volatile in January, the SEC released a statement declaring that the agency “will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity.”

Market manipulation can be prosecuted criminally by the Department of Justice or enforced through civil litigation by the SEC. Section 9(a)(2) of the Securities Exchange Act of 1934 prohibits “effect[ing] … a series of transactions in any security … creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.” According to recent reports, the SEC has been investigating whether social media posts advocating for other users to buy GameStop stock were part of a manipulative effort to drive up the share price.

Although regulators continue to investigate and gather facts, it seems doubtful that any strong legal case can be made against the retail investors. Online traders openly and transparently advocating to buy a stock likely doesn’t qualify as “a false or misleading appearance of active trading.” Further, there are numerous practical hurdles preventing regulators from cracking down. The r/WallStreetBets Reddit forum – which largely drove the initial GameStop price increase – has over 6 million users from around the world. Many of them have been using anonymous accounts, which further complicates the SEC’s ability to bring a market manipulation enforcement action.

“I think [the SEC is] going to struggle with it, and that’s why their statements have been so bland,” said Duke Law Professor Gina-Gail S. Fletcher in a recent interview. “They don’t really do a whole lot of market manipulation enforcement. It’s a really hard crime to prove. The statutory provisions and the case law related to it are all over the place, and they don’t favor the SEC.”

Going forward, large investors will likely be careful about shorting small cap public equities, such as GameStop or AMC. The prospect of online communities of retail traders sparking a short squeeze will now be on all professional investors’ radar. “This whole event is showing the power of large communities of everyday people,” said Reddit CEO Steve Huffman in an interview with the Wall Street Journal. “Not just massive institutional and professional investors get to participate in the stock market.”

Big Tech & Body Image: Is Enough Being Done?

In September, Tik Tok announced that the company will ban advertisements for weight loss supplements and diet fasting apps. The video streaming social media platform also pledged to restrict advertisements that “promote a harmful and negative body image.” The policy change is a response to backlash from users for allowing advertisements that promote dangerous fasting diets to young girls, as more than a third of Tik Tok’s users are under the age of fifteen.

Studies conducted over the past decade show that increased use of social media is strongly linked to declining mental health rates among US teenagers and young adults , which has been linked to drastic increases in teen suicide rates. Between 2009 and 2017, teen suicide rates increased 60% for ages 14 to 17, 47% for ages 12 to 13 and 46% for ages 18 to 21. The more time that teenagers spend on social media, the more insecure and anxious they feel over time. The long term effects have the potential to devastate both their mental and physical health. Teenage girls are especially vulnerable to developing body insecurities and eating disorders as a result of the pressure to fit a certain standard of beauty portrayed on social media.

Tik Tok is not the first social media company to come under fire for promoting dangerous products and lifestyles to young adults for their own profit. For years, Instagram was notorious for promoting questionable weight loss products targeted at teens, such as appetite suppressant lollipops and fruity weight loss tea. Although Instagram now bans the promotion of such diet supplements, the policy change came only after its involvement in a federal lawsuit against the “fit tea” brand, Teami.  The Federal Trade Commission filed a complaint against Teami for making unsubstantiated claims about the tea’s health benefits and promoting the tea on Instagram without any scientific evidence to support the claims. Teami was fined one million dollars.

Although banning harmful content on TikTok is undoubtedly a step in the right direction, these policy changes alone may not have the desired effect due to the company’s limited ability to effectively enforce content regulation. Instagram attempted to strengthen its guidelines by limiting the types of diet products permitted for promotion and introducing minimum user age requirements for diet product ads. However, Instagram’s policies have thus far failed to serve their intended purpose. Scam diet companies, like Teami, have taken advantage of loopholes in the new guidelines by substituting blatantly problematic dieting phrases with more insidious words that serve the same purpose. For example, companies easily rebrand the same diet products as promoting “wellness” rather than “weight loss,” without violating Instagram’s newest guidelines. It is likely that Tik Tok will face similar challenges while attempting to ban dangerous diet companies from marketing on their platform.

The ease at which companies are able to manipulate community guidelines raises the question of whether Big Tech truly cares at all about user safety. Were these guideline changes a genuine effort to fix past mistakes or a forced performance to save face in light of a scandal? Worse yet is the question of whether these tech titans even have the ability to control the content on their platforms at all. Now that the power of social media is realized, it is time to consider the moral and ethical responsibilities these companies have to protect users and, ultimately, the well-being of the next generation.

Actors Ryan Reynolds and Rob McElhenney Buy Welsh Soccer Club

You’ve probably never heard of Wrexham Football Club, but you’re about to. Despite languishing towards the bottom of the English soccer system, the small Welsh club has just been bought by actors Ryan Reynolds and Robert McElhenney.

To all but the most ardent of Welsh soccer fans, the takeover came as a complete surprise. Wrexham Football Club is a million miles away from famous Premiere League clubs like Arsenal and Liverpool. The town itself is the largest in north Wales, but with just sixty-five thousand residents it’s small, nothing like the big English cities to the east. Fan-owned since 2011, the team plays in the fifth division of the English football league system, and prior to the deal it was probably best known for beating European Cup Winners, Porto, in 1984. In fact, just nine years ago the Football Conference threatened the club with ejection from the league for an outstanding bond. Somehow, fans raised over $150,000 in just one day and saved the club from oblivion. So, why on earth would two Hollywood stars want to buy a tiny, fan-owned soccer team with little money and not much recent success?

Over the past couple of decades, U.S. ownership of British soccer clubs has become more and more prominent. In 2003 the Glazer family bought Manchester United, in 2010 the Fenway Sports Group – owners of the Boston Red Sox – bought Liverpool FC, and in 2011 LA Rams owner Stan Kroenke became Arsenal’s majority owner. In 2020, eight Premiere League teams and five English Football League teams are owned, or part-owned, by Americans. Most of these purchases seem to be driven by a perception that the British sports’ market is less saturated than the U.S. market, not as well-developed, and cheaper for investors. Indeed, the potential for growth – especially in commercial revenues – is large. Soccer’s international reach makes teams like Manchester City and Tottenham Hotspur global brands, and few domestic American teams can compete. Between 2010 and 2014, the Premiere League saw a 57% increase in their total commercial revenue, overtaking the NFL.

Reynolds and McElhenny see similar potential for growth at Wrexham Football Club. No one knows exactly why the American-Canadian duo chose Wrexham, but having promised to invest at least £2m into the club and turn it into a “global force,”  Reynolds and McElhenny certainly seem to think it’s a club worth the risk. Being fan-owned, Wrexham required no money to take control, leaving more for capital investment. But the club also has several unique selling points that could result in significant commercial success with millennials across the globe. Wrexham is the third oldest soccer club in the world, and the club’s stadium – The Racecourse Ground – is the oldest stadium in the world that still hosts international matches. The fans have an impressive history of bailing out the club with their own personal savings, and recently the club trended on Twitter after videos showed supporters travelling across the border to Manchester to face off against Black Lives Matter counter-protestors. Speculation already abounds about whether a multi-part Netflix documentary series on the takeover might be in the works, a deal that would transform the club’s finances.

Whether this will be a match made in heaven, or just one big mistake remains to be seen. American takeovers of British teams have generally proved unpopular with fans because supporters usually have no say in these deals, and most have failed to bring much success to their respective teams. Wrexham Supporter’s Trust, however, voted overwhelmingly in favor of Reynolds and McElhenney’s bid, with 98.6% backing the takeover. Although some fans expressed concerns that this may be a media stunt, the vast majority were impressed with the pair’s knowledge, sincerity, plans for growth, and their pledge never to relocate, rename, or rebrand the club. And things are already looking up for Wrexham Football Club. Since the takeover was made public the club has hit the headlines around the world, and orders for merchandise have started flooding in.

After years of pinching pennies and raiding personal savings accounts, Wrexham supporters now back a team with one of the largest budgets in their league. Promotion into the upper divisions may not happen overnight, but at the time of writing Reynolds and McElhenney can already boast a winning record. On Tuesday, Wrexham beat Hartlepool 1-0.

A New Wave of Antitrust: The Global Pushback Against Big Tech

After years of largely unchecked growth, big tech has come under heightened scrutiny not seen since the Microsoft antitrust suit ended in 2002. While concerns about the role of big tech in data privacy, online speech, and e-commerce have been in the public consciousness for years now, the discussion of how to address the market power of these large firms has taken on a new form with the announcement of antitrust investigations into Amazon, Apple, Facebook, and Google over the last few months.

Back in June, the European Commission launched a formal antitrust investigation into whether Apple’s terms of service for developers violate competition rules as well as a separate investigation to determine whether Apple was stifling competition from rivals to the company’s mobile payment system Apple Pay. The former case emerged after Spotify and several other companies lodged complaints over the 30% commission that Apple places on all digital purchases. European regulators have concluded that the commission on digital purchases has raised the price of products that compete with Apple and led to higher prices for consumers. For instance, in 2014 Spotify raised its monthly subscription price from $10 to $13 to maintain the same amount of revenue and still cover Apple’s fees. The next year, Apple introduced its own competing music app Apple Music for $10 a month, prompting Spotify to move subscription purchases from the app to their website so it could return its price to $10 a month. Epic Games, the creator of Fortnite, initiated private legal action over this same Apple commission issue earlier this fall.

Just over a week ago, the European Commission brought charges against Amazon for harvesting nonpublic data from third-party sellers who use its marketplace so it can find popular products to replicate and sell at a lower price. Amazon argues that its retail arm only comprises a small portion of global retail business, but because the company wields such immense power over a marketplace that merchants rely on to sell their products, concerns are often raised that it gives its own products better placement on the site. In fact, the European Commission found that merchants’ concerns are supported by a review of data on more than 80 million transactions and 100 million products. And with the ongoing global pandemic, Amazon’s e-commerce marketplace has only grown as more people choose to purchase items online rather than in-person.

In general, Europe has taken on a position of aggressive action with respect to regulation of big tech. Margrethe Vestager, the European Commission’s vice president for digital issues, has argued that the big tech companies “are essentially micro-economies, setting rules and policies with little transparency that determine the fate of millions of other businesses that have no choice but to follow along.” In sharing this sentiment, lawmakers in Germany and Britain have discussed changes to their antitrust laws so authorities can more easily bring cases against big tech. Also, in December the European Commission is expected to announce a number of new laws regulating the tech industry, potentially including rules prohibiting preference for one’s own products and requiring the biggest companies to share data with smaller rivals.

In addition to European countries, Australia, India, Brazil, and even China are taking action to regulate technology companies. China recently unveiled legislation that proposes limits on exclusivity requirements, selling products below cost, and different treatment of partners based on algorithms. The announcement led the Chinese internet giants of Alibaba, Tencent, and Meituan to see a drop in their share prices, but the potential effect this legislation would have on the major American tech companies is not yet clear. These moves by a number of countries seem to indicate a larger shift in attitude about the tech industry and a recognition of the need to reign in these major companies to protect the interests of individuals and small businesses.

While Europe has typically taken the lead in antitrust action, the United States has made some big moves this fall. After a congressional hearing this past summer and a 16-month investigation, the House Subcommittee on Antitrust released a report in which it recommended a breakup of the four big tech companies and substantial reforms to antitrust laws. The report recognized most of the major complaints arising in the recent antitrust actions such as Amazon’s use of sales and product data to create products that undercut third-party sellers, Google’s deal with Apple to be the default search engine on all Apple devices, and Facebook’s elimination of competitors through buyouts and copying their products. Even though the report was only endorsed by Democratic lawmakers, antitrust action is an issue with largely bipartisan support. Members of both parties agree that Section 230 of the Communications Decency Act, which shields companies from liability for content created by their users, should be eliminated, and they also agree that the large concentration of power in these four companies is antithetical to the value America places on economic competition. Although the establishment of a new administration might have dulled antitrust momentum as was the case with Microsoft in the early 2000’s, President-elect Biden indicated support for continued action against big tech during his campaign when he said, “Our commitment to [American] values [of competition, choice, and shared prosperity] must compel us to do far more to ensure that excessive market power anywhere … is not hurting America’s families and workers.”

In line with the conclusions in the House report, the Justice Department filed an antitrust lawsuit against Google last month, alleging that Google has maintained its dominant position in web search through an unlawful agreement with Apple that guarantees its search engine is the preset default on all Apple devices. The deal between the two companies was made fifteen years ago, and according to the Justice Department, roughly half of Google’s search traffic now comes from Apple devices. A former general counsel for Apple describes the relationship between the two companies as “co-opetition.” They compete over smartphones, apps, and laptops, but they cooperate with each other in agreements such as this where Apple benefits from the steady influx of $8 billion to $12 billion every year in exchange for Google’s virtually exclusive access to internet searches on Apple products. The Justice Department is asking the court for an injunction that would prevent Google from entering into deals like the one it made with Apple. If the government’s case were to succeed, then Google would lose the traffic from searches on Apple products with no obvious way to replace it. This would open up opportunities for smaller search engines like DuckDuckGo to snag a larger share of the market and create greater competition that might spur innovation in search engine products. However, if Google prevails, future challenges to big tech might be weakened, leaving legislative action as the strongest path to check the power of the tech companies.

The desire to regulate Amazon, Apple, Google, and Facebook has been growing over the last decade as these companies have found ways to invade every aspect of daily life and further consolidate power in the process. These four companies have a combined valuation of around $5 trillion dollars and have completely revolutionized the way people think about commerce, advertising, media, and speech. Just as antitrust action against IBM opened the door for software companies like Microsoft to emerge and the government’s antitrust case against Microsoft kicked down the door for browser-reliant companies like Google to thrive, maybe this round of antitrust action will crack open the door just enough to jumpstart the rise of the next wave of big tech.