The Daily Chase: GameStop falls further from meme stock highs

Here are five things you need to know this morning.

Meme stock no more: It’s shaping up to be yet another rough day for investors in meme stock GameStop as the video game retailer put out financial results after the bell on Tuesday that failed to meet analyst expectations. Revenue plunged almost 20 per cent, sending the shares down in premarket trading today. As I write this, shares are changing hands at about US$15 a piece; that’s down by more than 80 per cent from the split-adjusted high the stock hit back in early 2021, when retail investors on Reddit pushed the company into the stratosphere because they thought they had caught Wall Street in a short squeeze. Anyone who bought in at the highs is still waiting to cash in, and these quarterly results won’t do much to help on that front. The meme stock mania has mostly moved on to new names like Reddit and Donald Trump’s Truth Social – shares of both have doubled since going public in recent days.

Big banks reining in ultra-long mortgages: The head of Canada’s banking watchdog says he’s pleased to see Canada’s big lenders are starting to reduce the number and amount of long-term housing debt that’s out there. Speaking to a banking conference in Montreal, OSFI head Peter Routledge said during the pandemic the big banks allowed their mortgage underwriting to balloon to the point where it presented a “pocket of risk” that concerned him, but the good news is that recent data shows the trend is now moving in the opposite direction. At the height of the housing boom in 2021 prior to rate hikes, banks were handing out 40 per cent more mortgages than they typically do, and almost half of them were variable rates. The banks currently have $220 billion worth of home loans on their books that’s amortized for longer than 35 years. That’s high by historical standards, but down by more than a quarter from $300 billion at the peak. “That’s a really good sign and I’m encouraged by that,” Routledge said.

Office space: The signs of stress in commercial real estate are everywhere, as the pandemic has fundamentally altered the economics of office towers and there’s another example of that in action today. A Los Angeles office tower that TSX-listed Brookfield Asset Management defaulted on last year is being sold for 50 per cent less than the amount that was borrowed against it. Bloomberg reports that Consus Asset Management, a South Korea-based investment firm, has agreed to purchase the tower at 777 S Figueroa St. for about US$145 million. That’s about half the $289 million that Brookfield owed on the building when it defaulted on the loan last year. The company defaulted on other buildings in the city at the same time, and there are more and more examples of the drastic repricing underway in office buildings. Last month, the Canada Pension Plan made headlines for agreeing to sell an office tower in Manhattan for as little as $1.