What Are Meme Stocks, and Are They Real Investments?

Call options speculating on the stock climbing all the way to $30 were among some of the most heavily traded contracts in recent days. Mr. Veerman has no plans to stop buying or cash out; he believes digital collectibles will outlive trading cards. GameStop, once at the center of the meme stock mania, tumbled 13.9% and ninjatrader forex brokers brought its month-to-date losses to 30%. Shares of AMC fell 15.3%, pushing their monthly decline to over 31% and hitting their lowest level since June. She credits her decision to make these investments to the WallStreetBets, a sub-Reddit community with over 10 million followers where members discuss stock trading.

Even The Times turned one of its columns into an NFT, auctioning it off for $560,000. With the pandemic starting to ease in the United States, many had expected a year of wild investments to slow. Other names that have been popular on Reddit’s WallStreetBets chatroom also saw steep losses this month amid the overall risk-off sentiment and heightened volatility. She suggested taking a “chunk of every single paycheck” and putting it to work in the stock market. She argues that “you’re not even going to realize you’re missing it,” and that the potential upside is huge. Eventually, she even decided to quit her waitressing job because she was making more money day-trading and posting videos on TikTok.

Other meme names have included, among others, Bed Bath & Beyond Inc. , Koss Corp. , Vinco Ventures , Support.com, and even the meme stock enabler Robinhood Markets Inc. . WallStreetBets users quickly identified other downtrodden stocks with heavy short interest to boost. These included AMC Entertainment Holdings Inc. , the movie theater chain that saw flagging profits amid the COVID-19 pandemic, and Blackberry Limited , the outmoded smartphone maker. Traders had exchanged more than $14 billion worth of Medicare-backed insurance seller Clover Health shares by the close, eclipsing the company’s overall stock market value of about $9 billion.

If you’re an investor looking for a longer-term holding , 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. 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. In general, many of the meme stocks that saw sky-high stock prices in 2021 have come down quite a bit in 2022, sometimes to below where they started. Others, notably GameStop, remain elevated, although still far lower than the all-time highs.

A Meme Stock Glossary

Clover Health shares shorted increased by 4.5 million shares, worth $54 million, over the last week, based on research from S3 Partners. By comparison, Clover Health shares shorted increased by 9.7 million shares, worth $115 million, over the last 30 days. The “meme stock” phenomenon, which began with video game retailer GameStop Corp (GME.N) in January and spread to cinema operator AMC Entertainment Holdings Inc (AMC.N) in May, has prompted the U.S.

  • SPACs are shell corporations that go public in hopes of finding a private business to merge with, thus taking that company public.
  • A member of the hot 2020 IPO stock class, Palantir quickly gained a large investor following after making its public debut.
  • These included AMC Entertainment Holdings Inc. , the movie theater chain that saw flagging profits amid the COVID-19 pandemic, and Blackberry Limited , the outmoded smartphone maker.
  • Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks.

Some meme stocks have often become popular among retail investors after being targeted by short-selling professional investors, such as hedge funds, with participants having the explicit aim of causing losses among those firms. News coverage has described the choice to purchase such stocks as an act of rebellion intended to humble short-selling professional investors. Retail investors are also likely remain keen to pick up on the latest meme stock. Dominated by a man for all markets review younger investors, meme stocks are still seen as a way to generate outsized returns in a short period of time, especially in the face of rising housing costs and inflation in general. But, meme stocks also remain very volatile and risky, and retail investors are likely to be the ones to experience the most losses if it all comes crashing down. A meme stock refers to the shares of a company that have gained viral popularity due to heightened social sentiment.

Finance

Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world’s media organizations, industry events and directly to consumers. Shorts have been covering their short exposure in Wendy’s recently, with 1.4 million shares covered, worth $32 million, over the last month, Dusaniwsky wrote in a report on Tuesday. Clover Health shares, which closed up 85.8% at $22.15 after earlier hitting a record high of $24.93, had the highest trading volume on U.S. exchanges Tuesday.

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Mr. Veerman’s collection is now worth a life-changing sum of money on paper, even as the overall value for Top Shot moments has fallen 64 percent since February. After the National Basketball Association finals next month, it could fall even further. The technology for NFTs has been around since the mid-2010sbut became mainstream in late 2017 with CryptoKitties, a site that allowed people to buy and “breed” limited-edition digital cats with cryptocurrency. Crum also encourages young people to understand the larger concepts of investing. “Get in the mindset of wanting to invest to understand how compound interest can work,” she says.

Meme stock

SAN FRANCISCO — All year, amateur investors, propelled by a social media frenzy and a bit of boredom, have poured money into risky forms of investments like meme stocks, SPACs and Bitcoin. More traditional investors decry the lack of business fundamentals and strong performance to justify sharp surges in stock price. On the other hand, as individual investors point out, given enough support from the masses, a climbing stock price can eventually equate to a stronger business. This comes from renewed consumer interest, along with a rebounding share price or the raising of fresh cash through capital markets when the stock price rises. GameStop’s stock price then surged due to a massive short squeeze affecting some major hedge funds that were short the stock and forced to sell to cut losses.

Litquidity, an anonymous finance meme social media account, observed that people riding the wave of AMC stock this month seemed more willing to sell this time around than in the past. Drew Austin, an entrepreneur and investor, invested heavily in cryptocurrencies and NFTs, including digital horses, digital sports cards and some digital art. He took a “substantial liquidity hit” when cryptocurrency prices crashed in May, he said.

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Meme stocks often happened to be hard to borrow, with a high short interest ratio. GameStop followed suit in 2021, raising nearly $1.7 billion via a secondary offering of 8.5 million additional shares at an average price of more than $200 per share. Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana.

Meme stocks have been a hot topic since the pandemic. Crum turned them into big profits and a brand.

AMC shares dipped 7% on Friday, after CEO Adam Aron and CFO Sean Goodman sold significant portions of the stock. Prior to the pandemic, many young Americans were not investing in the stock market. According to a 2018 Gallup poll, only 37% of Americans under 34 years of age owned stocks. That number has quickly increased as the emergence of investing apps like Robinhood have taken hold during the pandemic. She’s shifted gears to be a finance major and is selecting courses around portfolio management so she can continue learning about the stock market.

Motley Fool Investing Philosophy

In addition, big investors, such as Scion Asset Management’s Michael Burry and Chewy co-founder Ryan Cohen, also tooklong positions. Ultimately, a short seller may 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. 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. 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.

While some thought that the meme stock craze would be short-lived, the phenomenon remains in-force months later. For instance, in the summer of 2022, meme stock communities have pumped the brick-and-mortar retailer Bed Bath & Beyond to extreme levels, where it was up 314% for a short period before crashing back down. With the advent of the internet, memes began to take the form of humorous social media posts and viral videos. Meme stocks are so-named because ideas about them, too, spread rapidly online on social media and web forums. Meme stocks also see communities built around them that perpetuate the hype and elaborate on the original meme, inventing specific terminology and symbols to accompany the stock. As the price of the shorted stock rises, the short seller will begin to experience losses.

More than 700 million shares changed hands versus their roughly 30 million average for the last 10 days. Once you hit those markers, be sure to include index funds and ETFs into your portfolio. These are an easy way to get into the market without having to individually pick stocks.

The meme stock movement unofficially started in the summer of 2020 when most people were stuck at home during the first few months of the pandemic. Looking for something to do and a way to turn some of that extra free time into money, many people turned to the stock market and social media for ideas. Roundhill Investments xtrade review philippines 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.

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