Blackberry renaissance conjured out of nothing (or possibly an EV bubble)

Remember Blackberry? Clunky black keyboard-based cellphone company that was once the darling of Canada's tech industry?

Well, Blackberry hasn't made cellphones for sometime now, overtaken as they were by better, cheaper and more user-friendly cellphones made by almost every other tech company. But they did try to reinvent themselves as a software company, and they didn't do a half-bad job of it. Now they're getting into autonomous car software and all sorts of sexy things.

Still it came as a bit of a surprise to learn that their share price had tripled in less than a month, from around $8 at the beginning of this year to almost $25 at opening on Monday morning. So, what gives? What bold announcement did they make that I missed?

Well, nothing really. The recent rally seems to have been conjured out of thin air, mainly as a result of a bunch of aspirational posts on Reddit, as far as I can see. (Gaming retailer GameStop Corp was treated to a similar a Reddit-based stock rally - ridiculous as it may seem, Reddit has apparently become required reading for investors and day-traders.) Blackberry did sign a deal with Amazon to work on connected cloud software program for cars, and it did manage to resolve a patent fight with Facebook. But even the company itself cannot explain the sudden investor interest in it, saying it is, "not aware of any material undisclosed corporate developments ... that would account for the recent increase in the market price or trading volume of its common shares".

It may all be part of the unprecedented and inexplicable boom in electric vehicle (EV) stocks over the last year, which some are comparing to the dotcom bubble of the late 90s (and we all know how THAT ended). American EV companies like Tesla, Fisker and Nikola, and Chinese companies like Nio, XPeng and Li, are leading the charge, with British company Arrival snapping at their heels. Hardly any of these companies are making any profits - some have not even started trading yet! - but their valuations are way in excess of anything that traditional financial analysis or commonsense might dictate.

EV stocks, and tech stocks in general, which account for a good proportion of the inexplicably booming stock market indices during this pandemic, look for all the world like the 1999 dotcom bubble. Goldman Sachs even has a Non-Profitable Technology Index for those looking to invest in tech stocks that look shaky in traditional terms, but whose share price is soaring regardless, which I think is hilarious (they also have a Most Shorted Index). Of course, it doesn't necessarilty follow that the bubble is about to burst, at least not anytime soon. Some analysts argue that today's companies are "made of stronger stuff" than the tech unicorns of 20+ years ago. They are certainly much bigger. But, then, the bigger they come...

But the main thrust of Blackberry's spurious revival seems to have come about (like GameStop's and AMC's) through the whole Reddit (r/WallStreetBets) thing. That story continues to make news, particularly after Robinhood and a couple of other major brokerage forms tried to shut down the amateurs and protect the profession short-sellers who had been betting against these struggling tech and media companies. (GameStop, for example, was one of the most heavily shorted stocks on the exchange, meaning that most regular investors only expected its shares to go further down - and that is exactly what the Reddit disruptors were targeting.)

But how bad is it that a bunch of individuals on a social media site legally subvert the system (and make a few bucks - quite a few bucks - in the process), given that the professional hedge funds and investors are doing just that, in a different way, all the time? (If you want a short explanation of conplelicated concepts like short-selling, short-squeezing, options, and a bite-sized summary of how the Reddit crowd managed to beat the system, the Globe and Mail has a good one.)

UPDATE

This little flurry of investment in so-called "meme stocks" was relatively short-lived and, according to the Canadian "free" stock-trading app Wealthsimple's analysis, not particularly effective.

Shares in GameStop, for example, have fallen by 90% since their record highs in early February, and many of these amateur investors got burned: 67% of them lost money, most just a small amount as they only invested small, but 3% lost $5,000 or more.

Those doing this speculative investing were overwhelmingly male millennials and Gen Zers, and 75% of them bought just 5 shares or fewer. So, it seems like most were just interested in playing a little game, and seeing if they could beat "the man" (yes, and no, it seems). But the cumulative effect of all these small investments - inexperienced investors jumping on dangerous trends that have no relationship  financial fundamentals - was still enough to seriously worry the industry.