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. The Robinhood app saw overwhelming trading volume in meme stocks at times, causing multiple trade delays, outages, and platform crashes. This led to user outrage along with class action lawsuits as well as regulatory fines and restitution of approximately $70 million. As far as anyone knows, the companies whose stocks are being traded as meme stocks haven’t actually done anything to reorient their fortunes in a way that would merit the tremendous run-up in their stock prices. The what does a solutions architect do surge of its stock wasn’t caused by any real changes in its underlying business. Rather, speculation and a stampede by retail investors resulted in a tremendous rally by GME stock which was unexpected by most.
Meme stocks: What they are and why they’re making a comeback in 2024
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. While meme stocks still garner attention in certain social media circles, the days of extraordinary gains from stocks like GameStop and AMC are likely behind us. These companies were heavily shorted for a reason — many had declining revenues, outdated business models, or struggled to compete with newer, more innovative competitors.
Where the ‘meme stock’ phenomenon stands, 2 and a half years after the GameStop craze
- Meme stocks refer to a select few stocks that gain sudden popularity on the internet and lead to sky-high prices and unusually high trading volume.
- The value of investments may fluctuate and as a result, clients may lose the value of their investment.
- The supply of a stock also affects the stock price, but this is not as large a factor because changes in the supply of a stock happen much less frequently.
- If investors are unable to meet the margin call, their broker may liquidate assets to cover the shortfall, potentially locking in significant losses.
- One of the biggest threats is the potential for graft-versus-host disease (GVHD), where the donated T-cells attack the patient’s healthy cells as it views them as foreign.
The ridiculous nature of the underlying price move exposed it to ridicule with clever memes that would gain popularity and go viral. Meme stocks are closer to penny stocks than blue-chip stocks and don’t pay dividends. Past performance of investment products does not guarantee future results. The responsiveness of the trading system may vary due to market conditions, best forex trading tips for beginners system performance, and other factors. Account access and trade execution may be affected by factors such as market volatility. Marie Briere of the Amundi Investment Institute reported that, during this same time period, roughly 22% of stock market trading volume in the U.S. was by individuals, also called “retail” investors, up from 10% in 2010.
In this and other forums that have popped up since, users work together to identify target stocks and then promote them, while also putting their own money to work. GameStop became the chief beneficiary of the first round of meme stock mania in late 2020 when Ryan Cohen, the co-founder of pet supplies group Chewy, announced he had a plan to revive the fortunes of the flagging company. Leading the way is video game retailer GameStop, whose shares have soared approximately 180% to $48.75 after closing at $17.39 Friday. This company’s status as a 5G provider does give investors reason to be upbeat about its growth outlook.
When investors bet a stock’s price will go down in the future, they “short” it by borrowing shares and selling them. Later, if the price does indeed fall, the short sellers can buy the stock, return the borrowed shares and pocket the difference. Because a surge in buying activity can send a stock price soaring, there are some benefits to owning meme stocks (and potential meme stocks before they rocket higher). Here is a list of six stocks that may usher in the next meme stock frenzy or what does issuing bonds mean 2021 just short squeeze by themselves. While everyone wants to know, «What is the next meme stock to surge?» it’s important to know what happens to most meme stocks. A look at the first meme stock helps to provide an idea of what can transform a stock into a meme stock.
OG Meme Stocks Still Below 2021 Highs
Gill accumulated shares and stock options beginning in 2019, sharing his insights and activities with the WallStreetBets board. To understand meme stocks and pick the next meme stock, you’ll need to understand the meme definition. In a broad sense, a meme is simply an imitation, such as an image or video spread around the internet. The name «meme stock» piggybacks on this viral nature as many traders flocked to these stocks due to repeated pushing on Reddit, Facebook, Twitter, TikTok, Instagram and other social media outlets. News of these stocks spread like wildfire throughout the internet, causing lots of dollars to flow in from various sources.
Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. SoFi’s financial services — all unified together via a singular app — got its start in the student loan niche of the industry. But since becoming a public company, the fintech stock favorite has gotten aggressive, expanding its reach and has added a few million new customers in recent years. As with other fast-moving businesses, SoFi’s biggest hurdle now is how quickly it can focus on breakeven.
One of the features of meme stocks, especially early on, has been that they tend to be heavily shorted names. This means that there is a lot of short interest in the stock, or that a large proportion of the company’s outstanding shares have been sold short. Unlike online pump-and-dump schemes aimed at defrauding unwitting investors, the promotion of meme stocks largely involves buying and holding with the above-mentioned strong hands even after the price spikes. Meme stock crazes, which in the past have been driven largely by investors on social media platforms and in online forums like Reddit, cause certain stocks to go viral.
The report also notes that there was a higher number of social media posts regarding GameStop on days with higher trading volume and on days with higher volatility in price. A meme stock is like any other stock in that it, too, is governed by the laws of supply and demand. However, unlike traditional stocks, demand for a meme stock, and therefore its share price, does not seem to be primarily driven by new information about the company or general economic or market conditions.
Plus, they offer IRAs (traditional, Roth and rollover) so users can manage their retirement funds along with their stocks all in one place. Another reason for the initial meme stock trades may have been that interest rates were near record lows. Cash offered almost nothing in the way of a return, so trading stocks may have felt like a way to earn something, despite its high risk.