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Today in business news:What we talk about when we talk about the big squeeze. Plus: the world’s most charming robots, and the end of an era for Amazon. Let’s get into it.
BEZOS STEPS DOWN
Jeff Bezos made a surprise announcement Tuesday that he will step down as chief executive of Amazon later this year.
A LOOK BACK
Bezos founded Amazon.com as a scrappy online bookseller in 1995, well before most Americans had internet access at home. Bezos transformed the Seattle startup into a $1.7 trillion global retail and logistics behemoth. Along the way, Bezos became the richest man in the world for a time — he was recently put in second place by Tesla CEO Elon Musk.
Amazon announced the news along with its fourth-quarter earnings — no surprise here, the company handily beat analysts’ projections for both sales and profit, capping a banner year as the pandemic boosted its retail and cloud businesses.
Bezos will be succeeded by Andy Jassy, an Amazon employee since 1997 who currently heads the company’s booming cloud business, Amazon Web Services.
Jassy is an obvious choice for the top job, especially after Jeff Wilke, the head of the company’s worldwide consumer division and another veteran Amazon leader, announced his retirement in August. Jassy is a longtime member of Amazon’s elite leadership group and has helped turn AWS into a the world’s biggest cloud computing provider.
CNN Business’ Clare Duffy has the latest.
THE BIG SQUEEZE
It’s no coincidence that the US stock market had its worst week in three months at the same time the Reddit rebellion sent shares of GameStop into the stratosphere.
Some of the more fortunate day traders who got in early made a killing. And, as the Reddit faction intended, hedge funds got absolutely gutted, setting off a negative spiral in the broader markets, my colleague Matt Egan explains.
Here’s how it happened:
- GameStop rises, short-sellers lose. WallStreetBets, the Reddit community behind the GameStop runup, successfully triggered an epic “short squeeze” — basically, they forced hedge funds that had bet against the GameStop to unwind their bets and buy the stock back.
- Hedge funds scramble to offset losses. As GameStop and the like kept climbing, losses mounted for short-sellers. They had to gin up cash in a hurry.
- A negative feedback loop begins. As hedge funds hemorrhaged cash, they sold off completely unrelated but highly liquid stocks such as Apple and Amazon. And that caused other investors to take chips off the table.
Last week’s frenzy illustrated how one small part of the market can trigger a domino effect and spread turmoil.
Not surprisingly, US stocks bounced back Monday as GameStop tumbled.
No matter what happens next to shares of GameStop, AMC, Nokia or other Reddit darlings, there’s now an undeniable force to be reckoned with on Wall Street: regular people, CNN Business’ Paul R. La Monica writes. Retail investors have proven that they can push hedge funds around, and there’s no reason for them to stop now.
QUOTE OF THE DAY
“The public deserves a clear accounting of Robinhood’s relationships with large financial firms and the extent to which those relationships may be undermining its obligations to its customers.”
— Senator Elizabeth Warren
In a letter obtained by CNN Business, the Massachusetts Democrat called out Robinhood for “abruptly changing the rules” on individual investors last week when the app temporarily banned purchases of GameStop and a dozen other heavily shorted stocks.
Uber’s future used to be self-driving cars. Now it’s delivering booze.
THe $100 billion company announced it is acquiring alcohol delivery startup Drizly for $1.1 billion in stock and cash. The deal, which is not yet complete, will result in Drizly being integrated into Uber’s food delivery app while also remaining a standalone app.
A bit about Drizly: The eight-year-old company was inspired by what a simple text message: “Why can’t you get alcohol delivered?” It now partners with thousands of retailers in more than 1,400 US cities to sell and deliver alcohol in under an hour.
A bit about Uber: The $100 billion company is leaning into the part of its business that’s actually thriving — food and beverage delivery. UberEats has been a rare bright spot for Uber during the pandemic, which gutted its core ride-hailing business. No trips to the airport; no commutes into work; no late-night stumbles home from a big night out. We stayed in, eating and drinking our feelings.
Uber has been on buying spree at the same time it’s been abandoning some of its loftier ambitions (I mean, same, honestly.) The company sold off its autonomous vehicle research division and its flying taxi operations in December.
The company acquired Postmates, one of its smaller food delivery competitors, over the summer. But the hit to its core business was severe, and Uber cut roughly 25% of its staff over multiple rounds of layoffs in the first half of last year.
WHAT ELSE IS GOING ON
- See Spot jump rope: Boston Dynamics is teaching its robot dog new tricks.
- Tesla recall: The carmaker is recalling 135,000 Tesla Model S sedans and Model X SUVs over glitches in their large center touchscreens.
- Shamrock season: McDonald’s is rolling out the fan-favorite Shamrock Shake and an Oreo Shamrock McFlurry in the US on February 15. Jury’s still out on whether shamrock is a real flavor, but we’ll go with it.
- New SPAC alert: Astra, a US-based rocket startup aiming to build cheap rockets to haul satellites to space, is going public via SPAC, aka a reverse merger.