There’s a good chance you have seen the term “meme stock” splashed across headlines before — even if you aren’t actively following business news. GameStop was the first successful meme stock but it wasn’t the only one. WallStreetBets users quickly identified other downtrodden stocks with heavy short interest to boost.
Any historical returns, expected returns, or probability projections are provided for informational and illustrative purposes, and may not reflect actual future performance. The name is lent to this particular kind of stock as the shares earning the title have been chosen and widely discussed in online communities. The first meme stock is largely considered to be struggling gaming company GameStop, which in early 2021 rose sharply in price as members of the sub-thread “r/wallstreetbets” on Reddit orchestrated a massive “short-squeeze.” The meme stock community can build considerable clout around a share through online conversation on sites like Facebook, Twitter and Reddit.
Are Meme Stocks Always A Short Squeeze Play?
GameStop stock broke millennial traded between less than $1 and about $5 per share in 2020. However, due to the hype, its trading volume rapidly increased, and it climbed above $80 per share in January 2021. For certain communities, it’s about more than just the stock price; it’s a collective effort or a “cause.” You may see phrases like “apes together strong” or other meme references that build group identity.
Meme Stocks: What Are They And How Do They Work?
Later in May 2021, flash selling occurred, in which interested buyers purchased shares, pushing prices by more than 500% in a week of trading. JSI and Jiko Bank are not affiliated with Public Holdings or any of its subsidiaries. Treasury Accounts.Investment advisory services for Treasury Accounts are provided by Public Advisors LLC (“Public Advisors”), an SEC-registered investment adviser. Public Advisors and Public Investing are wholly-owned subsidiaries of Public Holdings, Inc. (“Public Holdings”), and both subsidiaries charge a fee for their respective Treasury Account services. Before investing, consider your investment objectives, all fees and expenses, and any potential conflicts of interest. For more details, see Public Advisors’ Form CRS, Form ADV Part 2A, Fee Schedule, and other disclosures.
Risks
Prices rose 11.27% in the month to 16 May, topping $4 before settling back to around £3.90. On 13 May, Keith Gill – better known by his social media handle, Roaring Kitty – posted to X for the first time in three years. The former financial analyst is a YouTuber, livestreamer and Reddit user, whose backing of GameStop helped propel the share’s popularity. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.
- Its goal is to entice and engage a large audience with memes relating to the stocks of distinct firms.
- There is also collaborative element to the online chatter that drives meme stocks, and a community found in joint narratives built around potential meme stocks.
- Obviously, if you are invested in any meme stocks, you might expect heightened volatility—particularly when they are in the news, as they are now.
- The company saw sales decline when it failed to keep pace with rapidly evolving smartphone technology in the late 2000s and early 2010s.
- One essential way to destroy wealth, per Ritholtz, is joining the meme stock craze without a plan.
Risks And Rewards Of Investing In Meme Stocks
AMC Theaters CEO Adam Aron took advantage of the elevated valuation and engaged in a series of secondary (follow-on) offerings in 2021 as a result of sky-high prices and persistent demand for shares among individual investors. This raised more than $1.5 billion in the first quarter from voracious meme stock buyers. Some believe that meme stock communities coordinate their efforts to influence the prices of these shares but meme stock shareholders are often an unorganized set of independent individuals. Their independent actions have been shown to collectively initiate short squeezes in heavily shorted names.
But I think we should keep in mind that the Tesla story and mission was based on some pretty solid facts before, and many EV enthusiasts could see the plan playing out. EV powertrains were simply better at their essence — more efficient, exciting instant torque, simpler — and it was just a matter of driving down battery costs over time while scaling up production and demand. As long as the core technology followed the learning curve expected, EVs would win. Tag on the strong interest worldwide in stopping global heating and supporting zero-emissions technology and you’ve got a pretty clear path forward.
The term “meme” implies that the stock has become culturally viral—akin to an internet meme. The driving force behind these movements tends to be retail investors—individual investors who gather online and share opinions, experiences, and sentiments. Meme stocks gain popularity among individual investors through social media forums, internet memes, and online hype, causing prices and trading volumes to soar. The price of a regular stock can increase by 30% to 50% in a year. These expensive stocks are subject to high market volatility due to a lack of business fundamentals, performance, or prospects. GameStop and other such meme stocks are publicly traded equities whose stock price is heavily influenced by social media.
- Buying or selling a stock based on what you read on social media is risky.
- Market data is provided solely for informational and/or educational purposes only.
- Investing in stock involves risks, including the loss of principal.
- However, short squeezes aren’t legal when they’re the result of an intentional plot or scheme, according to the U.S.
- “There’s not a lot of stock to trade in the market relative to the market cap, so it can be pushed around,” Paul Hickey, the cofounder of Bespoke Investment Group, told Business Insider’s Matthew Fox.
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 as these became recognized meme stocks. Let’s take a quick example of what often happens with a meme stock. Let’s look at shakepay review the 5-year stock trend for AMC, the beloved movie theater chain. I love going to the movies, and I love AMC, but there’s no denying that AMC has faced a lot of challenges from the rise of streaming, the COVID-19 pandemic, and the continued rise of streaming.
For example, after peaking at almost $500 in January 2021, GameStop’s share price fell substantially, settling around the $15 to $30 mark by 2022. 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 has since decreased – despite a small rally in May 2024 – to around $5.50. Charles Schwab has funds that are straightforward options with no investment minimum. Expense ratios can be as low as 0.02%, meaning every $10,000 invested costs $2 annually.
What Are Meme Stocks, and Are They Real Investments?
Meme stocks are largely companies with brands that are recognizable to some degree to individual investors, compared with other stocks that may not have as much resonance with regular investors. If you enjoy the thrill of playing in the big league of the stock exchanges with a group of like-minded individuals with money to spare, this can be worth the ride. And if you are a FOMO-type person, you may enjoy being part of the action. To participate, you need to be connected to the relevant social media sites.
Visit the IRS website for more information on the limitations and tax benefits of Traditional and Roth IRAs. It’s worth noting that these motivations don’t always align with traditional investing principles, such as assessing a company’s fundamentals, reviewing its earnings history, or analyzing competitive advantages in the sector. For meme stock investors, the power of momentum and community sentiment can be just as influential. As markets are trading near record highs, the return of this trade has stolen some headlines lately with several meme stock prices surging and plunging.
The value of Bonds fluctuate and any investments sold prior to maturity may result in gain or loss of principal. In general, when interest rates go up, Bond prices typically drop, and vice versa. Bonds with higher yields or offered by issuers with lower credit ratings generally carry a higher degree of risk. All fixed income securities are subject to price change and availability, and yield is subject to change. Bond ratings, if provided, are third party opinions on the continuation patterns overall bond’s credit worthiness at the time the rating is assigned.
Others in the field have disagreed for years, and there are even robotaxis that have been operating for years that keep expanding their territory. But with a little more of a breakthrough, the dream is that Tesla will be able to flip a switch and turn millions of customer vehicles into robotaxis overnight. Also, despite there being a lot of competition in the robotics market, there’s a hope and a wish that Tesla is far ahead of the competition and will be able to make a multi-billion-dollar business out of its super special robots. FinanceBuzz makes money when you click the links on our site to some of the products and offers that we mention. These partnerships do not influence our opinions or recommendations. Some or all of the offers that appear on this page are from third party advertisers from which FinanceBuzz receives compensation.
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