In January, everyday traders teamed up on the subreddit r/WallStreetBets to send GameStop’s stock price soaring, sticking it to hedge funds who had bet against the video game retailer due to its layoffs and dwindling sales. Then in early June, investors became fascinated with AMC as the movie theater chain — which warned of a potential bankruptcy less than a year ago — saw its stock nearly double in just one day. Shortly after, Blackberry began surging as the Reddit crowd turned their attention to the tech company. Social media activity is the main driver of the prices and trading volumes of meme stocks, noted Britannica Money. “The hype of meme stocks is generally not based on changes in the underlying company’s fundamentals of financial performance,” wrote Britannica Money, but in messages on social media.
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Tuesday morning, AMC announced it had raised $250 million off the run-up in its stock value from the near-doubling of its share price Monday (though it was just $3 to $5 per share). But on Monday, one of the chief meme-stock cheerleaders, known by the online moniker Roaring Kitty, posted a meme signaling he was planning to become active again. “It’s just like wearing the trendiest clothes or knowing the latest viral challenge, people use social media as a way to connect and get views,” said Giles. “Hearing the latest stock trend is fun and makes people feel like they are ‘in the know.’ It also makes people dream about what it would be like to get rich. Legendary investor Warren Buffett offered an observation on market behavior in his 2023 letter to Berkshire Hathaway shareholders. But traders should keep in mind that even after their recent surge, GameStop shares are still down about 75 percent from their 2021 peak.
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In November 2020, it became public knowledge Cohen owned a 10% share in the company. By closing two days later, the value doubled; an 8x increase from the price at the time of Cohen’s and Gill’s previous posts. But before you really go YOLO with your life savings there are some things to keep in mind. These firms have been generally unloved by most mainstream investors, as reflected in their previously desultory share prices. The harsh reality of markets is that for every buyer, there must be a seller.
Why Are They Called Meme Stocks?
Moreover, PLCE is successfully courting new financiers and could make a comeback if it plays its cards right and improves its reach and liquidity. Thus, the stock could be worth holding for the long run even if a short squeeze never occurs. AMC’s stock closed Tuesday at $6.85 and has risen 135% since Friday, but it’s a far cry from its all-time highs above $300 set in June 2021. GameStop’s stock price has gained 179% over the past two sessions, though at $48.75 it’s still well below its record of more than $85 in January 2021.
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Bear in mind that meme stocks can be especially volatile, so plan accordingly and be prepared to continue investing more over time. If you’re an investor looking for a longer-term holding (think years rather than days, weeks, or months), there are some important factors to consider before buying a meme stock. Some business fundamentals and economic trends can go a long way toward balancing out what can be fleeting social media trends or hopes of a short-term short squeeze. Without their cult followings, meme stocks are not necessarily valuable assets.
Despite a steady stream of press releases and new developments, little of it ever seems to amount to profitable business expansion. Plug Power lost more than $1 billion in 2023, and losses are continuing to mount in 2024. Meme stocks are actual stocks listed on exchanges and available for trade. However, critics argue that their price performance and appeal have little to do with their fundamentals and much to do with their entertainment value as speculative playthings, much like casino games. Meme stocks, however, didn’t truly emerge until the year 2020 via the Reddit forum r/wallstreetbets. Unlike its predecessors and other investing message boards, WallStreetBets became known for its unconventional and often irreverent tone.
This is known as a short squeeze, and it accelerates a stock’s price increases as more and more short sellers are forced to bail out to cut their losses. Believing they could drive the value of the stocks higher by squeezing those short positions, Gill outlined a path in an August 2020 YouTube video that could send GameStop shares from $5 each to $50 or above. Gill and activist investor Ryan Cohen were key figures in motivating a community of online traders from the WallStreetBets subreddit to buy and hold shares of GameStop, running up their price. Meme stocks are for thrill-seekers who oftentimes won’t profit from their investments in them. If you are such a person and can afford to risk losing money, then you may want to try investing in this type of stock.
In general, many of the meme stocks that saw sky-high stock prices in 2021 have come down significantly in 2022. They are often now trading below where they started before the meme frenzy. Others, notably GameStop, remain elevated, although still far lower than its all-time highs. Ultimately, a short seller may https://www.1investing.in/ run out of available funds to hold on to the short and will be forced to buy back the shares at a higher price and close out the position. If many shorts are forced to cover at once, it adds additional upward pressure on the stock’s price as they are all forced to buy the stock and cover at ever higher prices.
But more than a year after the coronavirus pandemic was declared, things look to be perking up. Strong adult vaccination uptake in the U.S. and relaxed coronavirus restrictions in many states has resulted in positive operating income before depreciation and amortization in 127 of its 138 stores, as of May 2, 2021. Years ago, QS stock was one of the biggest winners of the SPAC boom, with shares rising tenfold at one point. However, a new battery technology takes a long time, from prototype to recurring revenues. Meanwhile, short sellers raised pointed questions about the company’s underlying technology.
Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Again, doesn’t sound like much — but it’s quite a bit when the total float is only 28.3 million shares. It’s also worth noting is that Intercept only sees an average of 1.11 million shares trade hands daily. Thus, it would take well over five days for short-sellers to completely exit their positions.
- Insider has interviewed investing pros who have simple strategies for spotting meme stocks, as well as the creator of a site that saves investors time by scanning Reddit forums for the next big meme stock.
- But if you want to invest more conservatively, steer clear of flash-in-the-pan meme stocks.
- “I believe the retail crowd is fully invested in this theme, and Wall Street has jumped on the coattails,” Burry said.
- Meme stock activity was given a great boost from bored individuals stuck at home during COVID-19 lockdowns combined with zero-commission brokerage apps like Robinhood.
Worst of all, shareholders have had to endure incredible dilution to fund AMC’s operating losses. AMC’s share count (adjusted for reverse splits) has risen pci dss stand for from just 24 million shares in 2019 to 189 million shares now. It’s hard for meme stock buying to offset that level of new share issuance in a company.
Named after the virality of internet memes found on social media, these stocks saw online communities form around them to boost and hype their prospects, even though meme company fundamentals remained questionable. Meme stocks became all the rage among retail investors during the COVID-19 pandemic. Meme stocks are created when a company’s shares catch fire with individual investors on social media platforms such as Reddit and quickly skyrocket in price.