A 12-Hour Drive for Airport Construction
Robinhood and r/WallStreetBets blur the line between investing and gambling.
Edit: This story was updated on September 22 to reflect additional events related to XpressSpa.
Stock market speculation has always resembled something of a casino. Great excitement for quick riches is often met with even greater disappointment. These days, we know it best by the “infinite leverage” glitch of Robinhood and nihilistic chaos of Reddit’s r/WallStreetBets. But five years prior to either Robinhood or WSB, there was just StockTwits, a social media-esque platform where each stock has its own “cashtag” message board, with users marking themselves as bullish and bearish. Fittingly unveiled in the middle of the Great Recession, StockTwits now has more than 2 million users. Anonymous and energetic, StockTwits users have that WSB energy, where every stock is just one press release away from heading “to the moon”. While Robinhood has more than 10 million users, the StockTwits distinction is its 150,000 daily comments, more than its recently released trading platform.
Enter, XpressSpa ($XSPA), a niche luxury retail spa service with 51 locations in 25 airports worldwide, until the COVID-19 pandemic brought air travel to a screeching halt, forcing the company to close all its spas and furlough some 500 employees. By early March, the stock price plummeted to below $0.30, down from more than $3 just a month prior. With air travel likely to take years to return to pre-pandemic levels, XSPA leaned in to this unfortunate reality, announcing plans to convert its spa locations into COVID-19 testing centers for airport and airline employees.
It was this decision that turned XSPA into another wheel of the retail trading bandwagon. According to Robintrack, less than 1,000 Robinhood users owned XSPA shares in February, prior to COVID-19-related shutdowns. When the company first announced its plans to convert spas to testing centers, the number of Robinhood users was around 2,000. By June however, the number of users was more than 100,000.
XSPA’s pivot is admirable, to be sure, but doubts should persist. The company was not yet profitable in 2019, the same year XSPA executives were sued for allegedly undervaluing company assets. The new testing centers would have capacity to test just 500 people per day. Not to mention, fundamentally restructuring a struggling business is a financial and logistical challenge. To help fund this transition, the company issued direct offerings in March and June, and a 1–3 reverse stock split as well. Two days after this story published, XSPA issued a third direct offering for the year.
XSPA’s testing center rollout was too slow for the short-term time horizon of most retail traders. By early August, only one testing center was operational at JFK in New York. On August 11, one StockTwit user, known as StockHeathen, decided enough was enough. He packed his car in Tennessee, grabbed a friend (another buddy’s girlfriend did not allow him to join) and embarked on the 12-hour drive to the Newark Airport. Heathen’s goal was quite simple — confirm with his own eyes that Newark was building XSPA’s second testing center.
Of course, evidence already existed that the Newark testing center was forthcoming. As early as May, XSPA’s CEO noted Newark and LaGuardia were testing center targets following JFK, an unsurprising next step given all three airports are operated by the Port Authority of New York and New Jersey. By early June, the company had job postings in Newark. Another StockTwit user living near Newark even posted pictures of the construction blueprints. Heathen moved forward, undeterred, developing a following on StockTwits and Twitter which helped fund his journey. The coveted prize? A picture and brief video of construction at Newark. What it accomplished for investors remains unclear to this day.
After a long but gratifying adventure, Heathen stopped in New York City for some pizza, crowdfunded by admirers on StockTwits. By the end of the day however, XSPA’s stock fell by about 7 percent, reminding us that even a collective of retail traders seldom has much market moving impact (though Hertz Rental Cars may beg to differ!) Users egged Heathen to drive on to New York’s LaGuardia Airport, but whether it was exhaustion or expired interest, Heathen returned to Tennessee. Just two days later, XSPA formally announced plans for the Newark Airport. Two weeks later, XSPA’s stock price remained below the day of Heathen’s journey, leaving us to wonder once more what exactly was accomplished in his journey to Newark. Two weeks after that and XSPA’s stock price had plummeted more than 40% since that Heathen’s travels. Yikes.
Ultimately, Heathen’s journey was harmless. It remains entirely possible, even likely, that XSPA can successfully transition into COVID-19 testing at airports. But internet hype fueling financial decisions can rapidly become a dangerous rabbit hole. Perhaps it is the anonymized, unsympathetic characters, the guise of investing, or the simple hilarity, but we can lose sight of the fact that “stock heathenism” is no laughing matter. For every teenager making $300,000 day trading, there is another committing suicide, or losing their life savings on a fraudulent company. Pioneering no-commission trades and fractional share investing, Robinhood has democratized the world of stock trading. All the while, it further blurred the line between investing and gambling, and there are meaningful consequences because of that.
