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Selfie app maker Meitu eyes overseas gaming market with $340 million deal – TechCrunch

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China’s largest selfie app maker Meitu has been busy working to diversify itself beyond the beauty arena in China. On Wednesday, the Hong Kong-listed company announced in a filing that it has agreed to pay about HK$2.7 billion ($340 million) for a 31 percent stake in game publishing company Dreamscape Horizon.

Dreamscape Horizon, a subsidiary of Hong Kong-listed games group Leyou, specializes in making video games for personal computers and consoles, and owns 97 percent of Canada-based studio Digital Extremes. This global connection will potentially hasten Meitu’s overseas expansion, and the foray into games, on the other hand, will help the Xiamen-based firm capture more male users. (Operating out of Xiamen might have also been convenient for Meitu to meet the coastal city’s booming hub of game developers.) Out of Meitu’s 110 million monthly active users overseas, only 30 million are male.

“The collaboration with Leyou is not only focused on mainland China but also the global market,” says a Meitu spokesperson in a statement. “Mainland China currently accounts for the majority of Meitu’s earnings. The acquisition will broaden our business scope and diversify the geographic streams of our income.”

The overseas move appears to be a tactical one as the domestic gaming market is crowded with established players like Tencent, NetEase and hundreds of smaller contenders. The local environment has also turned hostile to gaming companies as Beijing steps up scrutiny amid concerns of titles being violent and harmful to young players. The result was a months-long halt in game approvals that dragged down Tencent’s stock prices and prompted a major reshuffle in the giant. And before long, Tencent announced it would deepen its ties with Garena to distribute games in Southeast Asia. The hiatus ended in December, but companies are still feeling the chill as China is reportedly mulling a further pause this week.

Meitu is most famous for its suite of photo-editing and beautifying apps, but hardware has been its major income source for years. For the first half of 2018, the company generated 72 percent of its revenues from selling smartphones optimized for taking selfies, a category proven popular in a country where touched-up photos have become the norm. But Meitu’s hardware business is shrinking as smartphone shipment slows in China and phones from mainstream brands like Xiaomi and Huawei now come equipped with filters. It has, however, found a new home for its barely mainstream smartphone brand after Xiaomi gobbled it up in November to lure more female users.

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Discord bans WallStreetBets as subreddit briefly goes private

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Enlarge / Investors in GameStop and AMC briefly saw red as the WallStreetBets subreddit went private…

The WallStreetBets subreddit (WSB), widely credited with kickstarting GameStop’s epic stock run in recent weeks, was briefly taken private by moderators Wednesday night amid a tsunami of “so many comments and submissions that we can’t possibly even read them all, let alone act on them as moderators.” Discord also took steps to permanently ban the official WallStreetBets channel, citing moderators for “continuing to allow hateful and discriminatory content after repeated warnings.”

Discord was the first to act, shutting down the WSB server sometime around 6 p.m. In a statement provided to the press, the social media service said the WSB Discord server “has been on our Trust & Safety team’s radar for some time due to occasional content that violates our Community Guidelines, including hate speech, glorifying violence, and spreading misinformation. Over the past few months, we have issued multiple warnings to the server admin.”

The statement goes on to specifically clarify that the move was not “due to financial fraud related to GameStop or other stocks. Discord welcomes a broad variety of personal finance discussions, from investment clubs and day traders to college students and professional financial advisors.”

In the hours before the shutdown, a number of users recorded brief snippets of the server’s audio chat, which had descended into an indecipherable cacophony amid hundreds of crosstalking participants.

Meanwhile, on Reddit…

Then, sometime around 6:40 pm Eastern, WSB was set to private on Reddit, limiting public visibility and commenting abilities for existing and new posts. A message on the page during the downtime blamed “technical difficulties based on the unprecedented scale as a result of the newfound interest in WSB.”

The page was back up around 7:36 p.m., along with a new message from the moderators saying the subreddit had “grown to the kind of size we only dreamed of in the time it takes to get a bad night’s sleep.” Despite the use of special moderation software to handle the influx of attention, the WSB mods say that the “software isn’t allowed to read the Reddit news feed fast enough and submit responses, and the admins haven’t given us special access despite asking for it.”

Reddit representatives were not immediately available to respond to a request for comment from Ars Technica, but esports journalist Rod Breslau cited “Reddit admins” who confirmed that they “had no part” in the decision to take the subreddit private.

WSB mods were also quick to dispute Discord’s banning decision, saying that “if you gather 250k people in one spot someone is going to say something that makes you look bad… We blocked all bad words with a bot, which should be enough, but apparently if someone can say a bad word with weird unicode icelandic characters and someone can screenshot it, you don’t get to hang out with your friends anymore.”

Moderators also warned of fake Twitter accounts with “wallstreetbets” in their name claiming to speak for the increasingly popular subreddit (now 3.6 million members strong). Instead, they directed people to @wsbmod for official updates.

As far as the group’s most famous project, GameStop stock dropped precipitously in after-hours trading immediately following the move to take WSB private, going from $316 per share at 6:45 to under $250 per share by 7 p.m. The stock bounced back to a price of $291 in the hour following that dip, still significantly below the closing price of $341 at 4 p.m. Stock in cinema chain AMC saw a similar price dip and rally around the same times.

Social media users scrambled to new stomping grounds amid the upheaval tonight. A replacement subreddit board simply called WallStreetBetsNews had been set up prior to the brief privatization of the main group, and quickly grew to include 288,000 subscribers, as of this writing. On Discord, meanwhile, many users seem to have moved on to an extant (and heavily promoted) server called Big Pump Signal, originally created to speculate on cryptocurrencies but now increasingly focused on discussion of stock plays.

Can somebody do something?

The social media chaos comes as brokerage houses, exchanges, and regulators are increasingly expressing worry about the signals all this volatility is sending to traders. TD Ameritrade and Schwab both restricted certain kinds of trades in GameStop and AMC out of what TD Ameritrade said was “an abundance of caution amid unprecedented market conditions and other factors.”

“I have called for the New York Stock Exchange to suspend trading in GameStop stock for 30 days, to allow for a cooling off period”

NASDAQ CEO Adena Friedman, meanwhile, suggested on CNBC Wednesday morning that shares in these volatile stocks might need to be halted so everyone can catch their collective breath. “We do have technology that evaluates social media chatter,” Friedman said. “If we see a significant rise in the chatter on social media channels … we also match that up against unusual trading activity, [and] potentially halt that stock to allow ourselves to investigate the situation, to be able to engage with the company, and to give investors a chance to recalibrate their positions.”

GameStop and AMC both trade on the New York Stock Exchange (NYSE), so Adena’s comments are unlikely to have direct impact on those stocks. Trading in GameStop has been automatically and temporarily halted numerous times this week due to markers of extreme price volatility, not directly in response to examinations of social media chatter.

Massachusetts Secretary of the Commonwealth William Galvin, who has overseen the state’s securities division since 1995, has also called on the NYSE to halt trading in GameStop for 30 days “to allow for a cooling off period. I am hopeful that federal regulators will be looking into this as well.” While the SEC hasn’t publicly commented on any enforcement or investigation actions, the White House confirmed Wednesday afternoon that Treasury Secretary Janet Yellen is “monitoring the situation” surrounding GameStop stock.

For more on what exactly has been driving GameStop’s recent massive stock price increases (and no, it’s not anything relating to GameStop as an actual business), check out the comprehensive guide we published earlier today.

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“Warp speed,” “Prime Directive” predate Star Trek, per new reference tool

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Enlarge / The term “warp drive” actually predates its first use in the long-running Star Trek franchise by 14 years.

There’s no denying the profound influence that the Star Trek franchise has had on our shared popular culture. But it turns out that some of the best-known terms associated with the series—transporter, warp speed, and the famous Prime Directive—actually predate Star Trek: The Original Series by a decade or more. According to Jesse Sheidlower, a lexicographer and editor of the newly launched online Historical Dictionary of Science Fiction (HDSF), the first mention of those terms appeared in 1956, 1952, and 1940, respectively.

The origins of this new online resource date back to 2001, when Sheidlower was working for the venerable Oxford English Dictionary (OED). “OED has always been a crowdsourced entity,” Sheidlower told Ars. “In fact, it was probably the first crowdsourced thing.” Back in the late 19th century, OED editors typically placed notices in newspapers and magazines asking people to read various materials and contribute to their coverage of the English language.

While at OED, Sheidlower noted that science fiction was an area that was not very well served by scholarship, partly because science fiction hasn’t had much serious literary cache historically. That meant that the most significant (and rare) pulp magazines weren’t available in the usual archives, like the Library of Congress or the New York Public Library. So he set up a Science Fiction Citations Project (SFCP) and called on the science fiction community (fans and writers alike) to submit examples of the specialized terminology they found, all curated by moderators.

There was particular interest on “antedatings,” the earliest known examples of given words, which are of great interest to scholars. For instance, the OED had an entry for mutant—”in the sense of a person with unusual abilities or appearance that has arisen by a genetic mutation”—dating to 1954, but Sheidlower thought it was likely coined much earlier. He was right: the first appearance of the term was in 1934. The site remained active for many years, and one of the moderators, Jeff Prucher, even published a Hugo Award-winning book, Brave New Words, in 2007.

Over time, however, all that activity waned, and the site became effectively static. Sheidlower left OED in 2013 and no longer had access to the SFCP. Last year, he asked OED for permission to revive the project, including a major design overhaul. The pandemic meant he had sufficient time to undertake such a massive overhaul, and the fact that many rare science fiction sources had by now been digitized—including the original pulps—made it easier for him to do his own extensive research.

A sample entry for "chrononaut" in the Historical Dictionary of Science Fiction.
Enlarge / A sample entry for “chrononaut” in the Historical Dictionary of Science Fiction.

Jesse Sheidlower/HDSF

Like its predecessor, the HDSF helps improve and expand our knowledge of antedatings. Thus far, according to Sheidlower, the HDSF has found more than 400 antedatings. For instance, thought-controlled was thought to date back to 1977, but it has now been traced back to 1934. Deep space dates back to 1921 (instead of 1937), ray gun first appeared in 1923, deflector was first mentioned in 1931, and the notion of a mad scientist can be traced back to 1893. And the scientific terms biotechnician and graviton were first coined in science fiction, in 1940 and 1929, respectively.

The new HDSF also included some useful added features; it’s not just a list of words. Sheidlower went to great lengths to include links whenever possible to online source material—all added manually. For example, click on mutant, and you’ll find yourself on the entry page with a chronology of its usage starting with earliest mention to current usage. Click on the 1934 mention, and it will pull up an image of the actual page where the word first appeared.

“It’s turned from a site that was basically a notebook where people could write down the research they did into something that’s more broadly useful, making it both more fun to explore and more useful to those using it for serious scholarly efforts,” said Sheidlower.

There are currently no plans to adapt the HDSF into a print book, a la Brave New Words. But Sheidlower is hoping to continue to expand the resource, particular to include more 21st-century science fiction terminology. It already includes terminology from fandom communities (-con, faan, sercon), criticism, and particularly influential science fiction films and television shows (lightsaber, redshirt, TARDIS).

And while the HDSF has no official affiliation with the OED, apart from the association of its origins, at least one OED editor approves of the project. Executive Editor Peter Gilliver described it to The New York Times as “quite impressive, and very stylishly presented,” adding, “Jesse doesn’t like to leave any stone unturned. He’s a very dogged researcher.”

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The complete moron’s guide to GameStop’s stock roller coaster

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Enlarge / Pop goes the bubble…

Last week, an epic short squeeze had driven GameStop stock up to $40 a share, a roughly 1,500 percent increase from its low point nine months ago. Little did anyone know at the time that this would only be the beginning of the story.

As I write this, GameStop’s stock price is hovering around $350, up another 775 percent or so since I wrote about this situation eight days ago. By the time you read this, that number may be horribly outdated, as the stock continues to bounce up and down with extreme volatility hour by hour (it dipped down as low as $61 and peaked as high as $159 on Friday).

The current stock price now gives the company a market cap of about $26 billion.

On the surface, that means the market currently thinks GameStop is worth more than twice as much now (during a potentially existential threat to brick and mortar game sales) as it was during the height of the Wii boom in late 2007, when console game downloads were barely a thing.

It’s an understatement to say that nothing has changed about GameStop’s fundamental business to justify such a quick and dramatic rise in valuation. But getting at what is causing the nearly vertical launch of GameStop’s stock value is a little complicated.

A short lesson on shorts

To understand what’s happening to GameStop stock, first you have to understand short selling, where investors make a bet that a stock will go down instead of up. To do this, they borrow a share of the stock (for a fee), immediately sell it to pocket the current value, and agree to buy another share later to “cover” their short position.

But shorting stocks comes with huge risks if the stock price goes up. When your short position eventually comes due, you’re forced to buy the stock at whatever price the market currently sets, and there’s theoretically no limit to how high it could go. If you invest $1,000 in buying a stock, all you can lose is $1,000. If you borrow $1,000 worth of stock to short it, you could lose a lot more than that when you’re forced to buy much more expensive stock.

Investors as a whole were so sure that GameStop stock was going to go down that they wanted to borrow every single available share (and then some) to make money on the coming collapse.

When investors do lose money on a short position in this way, they often reborrow more short options at the new price to hedge their bet (if they expected the stock was overvalued before, it’s probably even more overvalued now, right?). That “short squeeze” process can theoretically keep going until the stock price actually starts going down (perhaps because traditional “long” investors want to pocket their profits) or the short sellers run out of capital to keep borrowing.

GameStop has been one of the most heavily shorted stocks on the market for a while now. Since the middle of 2019, the “short interest” (i.e., the number of shares investors have expressed interest in borrowing for a short position) has heavily surpassed the stock’s “free float” (i.e., the number of actively traded shares available). In other words, investors as a whole were so sure that GameStop stock was going to go down that they wanted to borrow every single available share (and then some) to make money on the coming collapse. And keep in mind, this phenomenon started when GameStop stock was already trading at historic lows of $5 a share or less.

GameStop faces plenty of headwinds to its core business of selling disc-based games in brick-and-mortar stores (as we’ve written about extensively). But that extreme level of short interest in an already heavily depressed stock was probably overly pessimistic about the company’s near-term prospects.

“They don’t have net debt, so they’re not going bankrupt or anything,” Wedbush Morgan analyst Michael Pachter told Ars last week. “And with the new console launch, they’re probably going to sell a lot of consoles and be fine.”

As it turns out, a group of retail investors noticed this excess of pessimism and was poised to exploit it.

Enter the Redditor

The WallStreetBets subreddit (WSB) describes itself as “like 4chan found a Bloomberg terminal,” and that’s not a bad description. WSB is a generally disorganized mess of posters throwing up memes and slang that can be hard to parse for an outsider. At the center of it, though, are members who analyze the market for opportunities so they can try to rally the sub’s millions of subscribers (2.9 million as of this writing) to a potential value play.

A few posters on WSB began to notice GameStop as a potentially undervalued and overshorted stock back in 2019, without too much wider action. But the group’s attention began to crystallize around April 2020, when WSB member Senior_Hedgehog laid out what turned out to be a prescient case for “the biggest short squeeze of your entire life.”

GameStop stock remained relatively flat in the months following that post. That changed in August, when Chewy.com founder Ryan Cohen bought a 9 percent stake in the company. Since then, Cohen has increased his stake in the company, earned control of three board seats, and promised to try to refocus the retailer into a more purely digital business.

“GameStop’s challenges stem from internal intransigence and an unwillingness to rapidly embrace the digital economy,” Cohen said in a November SEC filing. “If GameStop takes practical steps to cut its excessive real estate costs and hire the right talent, it will have the resources to begin building a powerful e-commerce platform that provides competitive pricing, broad gaming selection, fast shipping, and a truly high-touch experience that excites and delights customers.”

The YOLO-riffic logo for r/WallStreetBets.
Enlarge / The YOLO-riffic logo for r/WallStreetBets.

Whether or not that transformation will be possible, the interest from the usually risk-averse Cohen was enough to get some investors to take another look at buying GameStop. The price started creeping up from $5 in the middle of August to nearly $20 by the end of the year. That put some pressure on all those short positions, but not enough to stop them from reborrowing and keeping short interest high.

On Reddit, meanwhile, the hype around the turnaround only got louder and louder as the stock price increased. Some WSB members (and others) posted lengthy analyses suggesting a “fair value” of $100 or more per share for GameStop based on expected earnings (analysts in aggregate suggest a much more modest $13.44 price target based on the fundamentals). Others take a more meme-centric, “for the lols” route, reminding their compatriots that “stocks only go up” and urging “diamond hands” (i.e., hands that never stop holding) and bitcoin-style HODL strategies as GameStop stock goes on a “rocket to the Moon.” Some even encouraged GameStop stock owners to tell their brokers not to allow those shares to be borrowed for further short options, squeezing short borrowers even further (it’s not clear how much effect this part of the effort has had, in aggregate).

Through it all, the WSB-ers have been able to coalesce around a vision of themselves as the “little guy” using cheap retail trading tools to fight against a common perceived enemy: massive hedge funds that were heavily shorting the stock. Citron Research founder Andrew Left, who’s been publicly arguing for a $20 price target for GameStop, said last week he was targeted by a wave of harassment and attempted hacking ahead of a planned video arguing for the short position.

More recently, Melvin Capital Management has seen its value fall 30 percent this month, thanks in no small part to a heavy short position in GameStop. The hedge fund was forced to take a $2.75 billion cash infusion from Citadel to stay solvent in recent days. CNBC reports that Melvin finally closed out its short position Tuesday afternoon, i.e., taking a huge loss rather than redoubling on the short borrowing. But many WSB posters are publicly doubting that report and are confident they can literally bankrupt a massive hedge fund if the GameStop stock price goes high enough.

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