William Simpson
It’s like 2021 all over again — at least, in one bullish corner of the stock market.
Several “meme stocks,” or companies whose shares are driven by social media buzz rather than traditional business fundamentals like growth and profits, rose before trading began Tuesday. This is the second day in a row that these stocks have appeared on the stock market, following GameStop 72% increase on Monday.
Other favorites with WallStreetBetting, the Reddit forum that fueled the meme stock craze three years ago, jumped in premarket trading on Tuesday. Among them are movie theater operator AMC Entertainment, whose shares rose 78% in premarket trading, and BlackBerry, with a 26% gain. GameStop shares soared more than 130%.
The resurgence of the meme stock phenomenon comes as trader Keith Gill, aka “Roaring Kitty,” resurfaces on X (formerly Twitter) after a three-year hiatus, posting a outline Sunday night of a man leaning forward in a chair. Gill became the face of stockbroker memes after purchasing GameStop shares for $53,000 in 2019 and allegedly turning them into a multimillion-dollar stake due to the hype surrounding the stock.
Once again, traders are posting about meme stocks on WallStreetBets, encouraging others to buy stakes in GameStop and favorite additional memes with the term YOLO, or “you only live once.” Others posted screenshots of their earnings from AMC, BlackBerry and additional stocks.
“Extremely speculative”
The appeal is simple: the opportunity to make quick money in a short period of time, with the bonus of joining it among professional Wall Street traders who have avoided meme stocks.
“[W]We expect day traders to pile in not because they think the memes have any real value, but because they hope others will get FOMO (the Fear of Missing Out), drive up the price and then be able to sell and make a quick profit,” noted Nigel Green , CEO of financial advisory firm deVere Group, via email.
But there are very real risks, Green added.
“Of course some can make lots and lots of money,” he said. “But let’s be very clear: This is extremely speculative, and valuations can be expected to be incredibly wild — in both directions.”
Among the immediate victims are not retail investors, but rather hedge funds and other traders who bet that GameStop shares would fall. Such a strategy, called short selling, involves a trade that will generate a profit if a stock falls – investors will lose money if the stock rises.
On Monday, hedge funds with short positions in GameStop lost more than $1 billion, analytics firm S3 Partners told CBS MoneyWatch.
