Where the ‘meme stock’ phenomenon stands, 2 and a half years after the GameStop craze : NPR

Without their cult followings, meme stocks are not necessarily valuable assets. These online communities, such as the popular Reddit forum WallStreetBets, coordinate buying and selling efforts to influence stock prices. With enough online support, meme stocks can maintain elevated stock prices regardless of the underlying company’s worth.

From there, the number of retail investors buying shares and call options snowballed, driving up the price. The price increase drove out some short sellers early on as it attracted various big-name investors and public figures, such as Elon Musk and venture capitalist Chamath Palihapitiya. Meme stocks have been a boon to investors, day traders, and brokerage platforms but companies have also capitalized on the meme stock phenomenon.

What started the meme stock movement?

Capital gains tax rates are especially high on stocks you held for less than a year. Short selling is when somebody sells shares that they do not own, hoping to buy them back at a lower price. That seller must borrow shares from somebody who is long the stock in order to sell them. As more and more shares are sold short https://www.dowjonesanalysis.com/ in this way, there are fewer shares left available to borrow. Once a stock becomes hard to borrow, even the most motivated short seller may be unable to do so. A few days later, the former CEO of Chewy.com and investor Ryan Cohen purchased an unknown amount of GME stock, which Gill acknowledged on Twitter (now X).

1. However, simply writing off all meme stocks as too risky can be a mistake.
2. That seller must borrow shares from somebody who is long the stock in order to sell them.
3. The incredible surge of GME stock last year, which took its shares from around $4 in mid-2020 to more than $480 per share in January 2021, was one of the most incredible near-term short squeezes I’ve ever seen.
4. Meme stocks, however, didn’t truly emerge until the year 2020 via the Reddit forum r/wallstreetbets.
5. GameStop, among the first meme stocks, is a prime example of how the retail investor community identified a highly shorted stock and used a short squeeze to work in their favor.

The new movie “Dumb Money” is about the GameStop craze in 2021 when amateur traders banded together on the social media site Reddit to give professional investors a run for their money. Because a surge in buying activity https://www.forex-world.net/ can send a stock price soaring, there are some benefits to owning meme stocks (and potential meme stocks before they rocket higher). While it is possible to make money with meme stocks, it is an extremely risky venture.

Other meme names have included, among others, Bed Bath & Beyond Inc. (BBBY), Koss Corp. (KOSS), Vinco Ventures (BBIG), Support.com, and even the meme stock enabler Robinhood Markets Inc. (HOOD). 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. The word “meme,” from the ancient Greek word “mimema” — meaning imitation — is used to describe information that is imitated and often spread via pop culture references on social media. Thus, a meme stock is a shared investing idea imitated by other investors. If you’re thinking about buying and selling meme stocks, keep in mind that you will probably have to pay taxes on your profits.

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In 2022, Bed Bath & Beyond announced intentions to sell 12 million shares in a secondary offering as meme stock promoters pumped the value of its stock. However, the stock fell steeply following the company’s announcement of the plan. A meme is an idea or some element of popular culture that spreads and multiplies across people’s minds. Memes gained increasing prevalence and relevance as the internet and social media grew. They allow people to rapidly spread humorous, interesting, or sarcastic videos, images, or posts to others around the world. The rapid and multiplicative effect of sharing such posts could make them go viral.

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. But, as many traditional investors and analysts point out, these viral stocks can be very risky since they rely on high interest from small investors to https://www.forexbox.info/ sustain the stock prices’ liftoff “to the moon.” Simply put, meme stocks skyrocket in price in a short period (often hours or days) because of a sudden surge in interest online or on social media and subsequent buying among small individual investors. These short-term surges can often reverse course just as quickly, though, making meme stocks far more volatile than average stock market moves.

He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. In any case, I’d certainly recommend considering buying MSFT stock now . I’ve been interested in the shares for some time, and I may pull the trigger on it soon. This company’s status as a 5G provider does give investors reason to be upbeat about its growth outlook. However, it was Nokia’s following on forums such as Reddit’s WallStreetBets which really galvanized many investors to pile into this name.

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This Canadian company is known for pioneering the smartphone, but it quickly went by the wayside when Apple revolutionized the space. These days, Blackberry is a software firm providing endpoint security software and other Internet of Things management products for customers such as the auto industry. When you open and fund an eligible Charles Schwab account with a qualifying net deposit of cash or securities. We believe everyone should be able to make financial decisions with confidence. Roaring Kitty’s real name is Keith Gill who was also on Reddit as u/deepF…Value and active on the subreddit r/wallstreetbets. Investing can be the most surefire path to becoming and remaining financially free.

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Diversification across multiple investments helps buoy your portfolio in case one investment sinks. GameStop may have started the meme stock mania, but others have followed in its footsteps. Below are the five best-performing stocks in the Solactive Roundhill Meme Stock Index, ordered by one-year returns. 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.

With expertise in FX, macros, equity analysis, and investment advisory, Stavros delivers investors strategic guidance and valuable insights. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.

Retail investors are also likely to remain keen to pick up on the latest meme stock. 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. 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. The YouTube persona Roaring Kitty posted a future viral video laying out the case for why shares of brick-and-mortar video game retailer GameStop Corp. (GME) could soar from $5 to $50 per share in August 2020.

One example is the VanEck Social Sentiment ETF (BUZZ 2.17%), an actively managed portfolio of 75 stocks that rank high in social media conversations. This ETF has an annual expense ratio of 0.75% (meaning it costs $75 per year for every $1,000 invested). GameStop (GME) became a heavily shorted stock due to a decline in foot traffic at malls and dwindling revenues. The short interest, therefore, had grown to over 100% of the shares outstanding. The case that a short squeeze could be precipitated was then developed and touted on Reddit and other investment forums. In addition, big investors, such as Scion Asset Management’s Michael Burry and Chewy co-founder Ryan Cohen, also took long positions.