Meme Stocks: What Are They and How To Buy Them
Roundhill Investments came out with a meme stock-focused ETF in December of 2021 under the ticker symbol ‘MEME’. MEME features an equal-weighted portfolio of 25 stocks based on social media popularity and market sentiment. The top 25 such firms are included in the portfolio, which is re-examined and rebalanced twice a month. Meme stocks have been a boon to investors, day traders, and brokerage platforms but companies have also capitalized on the meme stock phenomenon. As a result of sky-high prices and persistent demand for shares among individual investors, AMC Theaters CEO Adam Aron took advantage of the elevated valuation and engaged in a series of secondary (follow-on) offerings in 2021.
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Hedge funds are types of investments that pool money together from wealthy investors, and short selling is when you borrow shares from a broker and immediately sell them with the hope that the stock price will fall. If it does, you can repurchase the shares at the lower price, return them to the brokerage and keep the difference as profit. Without their cult followings, meme stocks are not necessarily valuable assets.
What’s Different This Time
Currency exchange rates are constantly changing which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK. Rehl and subreddit moderators aren’t the only ones keeping a close eye on meme stock manipulation. The Justice Department and the San Franciso US attorney’s office are both investigating the events of this January to determine if the sudden surge in GameStop shares constitutes market manipulation.
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Let’s dive into the latest in the land of meme stocks and why it might matter for you. In January 2021, Nokia’s share price jumped 106%, causing a short squeeze. Like GameStop, however, its price subsequently declined, settling around the $4 mark by late 2022. The sorts of short squeezes and parabolic moves that have proliferated really defied the rules of theoretical finance. Seeing some of these rallies play out, by the shares of companies with dubious fundamentals, has been remarkable.
- Dominated by younger investors, meme stocks are still seen as a way to generate outsized returns in a short period, especially in the face of rising housing costs and inflation in general.
- I’ve been interested in the shares for some time, and I may pull the trigger on it soon.
- Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader.
- This has since decreased – despite a small rally in May 2024 – to around $5.50.
As a result, meme stocks can become overvalued relative to fundamental technical analysis. After the initial meme stock craze, GameStop shares drifted steadily lower, settling at just over $10 a share by the Spring of 2024. However, in mid-May of that year, the stock experienced a sudden resurgence, fueled by the return of Keith Gill, aka how to use polygon matic staking “Roaring Kitty,” to social media.
And these differences will be crucial to our understanding of market movements and investor behaviour in the future. Indeed, as these became recognized meme stocks, members of r/wallstreetbets and similar outlets began to acknowledge the humor (for the “lulz”) of seeing such legacy companies emerge from the ashes in the stock market. GameStop has been one of the biggest winners of the frenzy this week, along with AMC Entertainment (AMC). Those and other meme stocks have shot higher following the online return Sunday of one of the prominent drivers of the earlier meme craze. Companies that become how to buy stocks without a broker meme stocks have usually performed poorly in recent years, and attracted attention from short-sellers – investors who effectively bet on the price of a share going down further.
BlackBerry’s 5-Year Share Price Performance
When Covid-19 slowed the rollout of 5G, short-sellers flocked to Nokia. This has since decreased – despite a small rally in May 2024 – to around $5.50. However, after releasing new shares in a bid to raise capital for restructuring, its price shot up to $5 per share on 25 January. Gill made no mention of GameStop or any other company in his posts, but his reappearance on X – previously known at Twitter – was enough to spark fresh investment that saw GameStop’s price rise by over 74% in a single day. Here, we take a look at what makes a meme stock and, once you’re aware of and accept the risks, explore how to invest in them. However, Blink certainly fits the definition of “meme stock” if you get a closer look at its operating performance.
The companies Reddit retail traders are focusing on have come to be known as meme stocks. That’s because they’re valued for their social media popularity, not their (often poor) operating performance. While not an all-encompassing description, retail investors from Reddit and other social media chatrooms have been banding together and seeking out stocks with high levels of short interest. Since a large percentage of short-sellers are institutional investors or hedge funds, the rise of the retail investor has taken on the feel of a David vs. Goliath battle. 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.
Market analysts and observers drew parallels between the 2024 rally and the original meme stock phenomenon of 2021. However, opinions were divided on whether this new surge would have the same lasting impact or if it was simply a brief revival of the speculative fervor that had characterized the earlier event. Regardless, the sudden resurgence of meme stocks in May 2024 served as a reminder of the unpredictable nature of markets and the power of social media to drive investor behavior. The stock market is in the thick of another meme stock frenzy, sparked by Sunday night’s online return of one of the key figures of the 2020 and 2021 craze that sent GameStop (GME) shares to record highs. By January 2021, when GameStop’s stock price surged and financial news companies began to extensively cover the nascent trend, meme stocks went from cult following to capturing headlines. For example, one of the most prominent meme stock promoters is known by his social media handle Roaring Kitty.
The Commodities Futures Trading Commission is conducting a similar investigation regarding the prices of silver futures. Shares of video game retailer GameStop (GME) jumped after meme stock hero Roaring Kitty, whose real name is Keith Gill, posted on X for the first time since June. The shares later pared some of their gains, though they remained up about 6% late Friday afternoon. But our research also suggests that the behaviour of social retail traders is not simply about a revolt against finance, or irrational risky bets. It is about how today’s stock market reflects a new generation of investors, facing economic pressures which are quite different to those of previous generations.
So-called meme stocks became a hot investment theme for day traders and retail investors early in 2021, resulting in short squeezes on hot stocks at the time such as GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC). 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. Vanda analysts wrote that they believe the most likely path could be that a number of hedge funds participate in a short squeeze of meme stocks, and exit their positions before the waves of retail traders sell their shares. That could mean the latest surge in stocks such GameStop and AMC could be shorter and reach less dramatic heights than in 2021. While not making any recommendations or indications about GME or any other stocks, these posts nevertheless reignited frenzied interest in meme stocks, causing a massive surge in trading volume and price. GameStop shares skyrocketed nearly 100% on Tuesday, May 14, 2024, following a 74% increase the previous day.
While it is possible to make money with meme stocks, it is an extremely risky venture. Meme stock investing relies on trying to time the market, which humans, even those professionally trained, are notoriously bad at. It also depends on knowing which stocks will pop and which won’t — which is essentially impossible. Additionally, Intercept is the 1 database applications and the web perfect candidate for a short squeeze.
The company saw sales decline when it failed to keep pace with rapidly evolving smartphone technology in the late 2000s and early 2010s. By 2013, its market share had fallen to just 3%, according to Statista. This news caught the attention of Reddit’s r/wallstreetbets forum, and AMC became one of the most frequently mentioned shares on the platform. On 14 May, the stock reached $64 but a couple of days later it was back below $40.