The financial institutions cited the need to meet financial requirements imposed by stock clearinghouses. Investors were outraged, sparking discussions about the fairness and transparency of the stock market. As with other highly volatile investments (such as the related cryptocurrencies movement), there are drawbacks to betting on meme stocks. “A meme stock is any publicly traded stock with a price performance that’s strongly influenced by activity on social media,” according to Britannica Money. The International Review of Economics & Finance wrote that meme stocks became popular through the social media platform Reddit.com, specifically, subreddit.com, also known as WallStreetBets. “Retail trading in meme stocks is facilitated by social media, which are used as coordination devices to synchronize buy signals,” the review wrote.
Meme stocks have been a boon to investors, day traders, and brokerage platforms but companies have also capitalized on the meme stock phenomenon. 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. Stocks are usually shorted when the share price is expected to decline due to poor company performance or unfavourable economic conditions. Short selling relies on ‘borrowed’ stocks that must be bought back and returned to close a position—which can be hard if prices rise quickly and investors aren’t selling, leading to short seller losses. Late the previous year, an online community of retail investors rushed to buy shares in this struggling video game retailer – GameStop – causing its share price to surge.
What parents should know about the viral ‘Italian brainrot’ trend taking over kids’ screens
Here are a couple of obvious meme stocks and a couple that you might not even realize are. But other than those, nostalgic meme stocks include names like Blackberry, Bed Bath and Beyond, and Nokia. You can sell an investment by logging into your investing platform account, tapping the share you want to sell. Before you can buy US shares, you’ll also need to complete a W-8 BEN form.
- Find stocks with highly shorted positions against them and buy those shares until short sellers are forced to close their positions.
- Memes can be defined as short, self-replicating pieces of cultural information, and they have gotten supercharged by going digital.
- GameStop followed suit in 2021, raising nearly $1.6 billion via a secondary offering of 8.5 million additional shares at an average price of about $200 per share.
Look at the meme stock craze as a message from retail traders to hedge funds. The stock market will always be tipped How to invest in 5g in favor of big money, but the little guy is finding ways to fight back. It might seem absurd that a cryptocurrency with a dog’s face or a frog meme can be worth billions, but meme coins tapped into a unique zeitgeist.
How to buy meme stocks in the UK
Owning one can be anxiety-provoking, too, as you watch the stock price zoom up and then plummet. This article explores the meaning of a meme stock, what causes it and what are its likely consequences for the investor. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.
How to Invest in Meme Stocks 👷♂️
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy alvexo forex broker or sell particular stocks, securities or other investments. Memes began to take the form of humorous social media posts and viral videos with the advent of the internet. Meme stocks are so named because ideas about them spread rapidly on social media and web forums. Communities are built around them that promote the hype and elaborate on the original meme, inventing specific terms and symbols to accompany the stock.
The footwear maker has been churning out new and interesting products—including a “warm and cozy” holiday edition—truly riding on the rise in the public interest. Furthermore, the Gamestop craze is in many ways reminiscent of revolutions of old—it came out of a place of spite and anger, it targeted the rich and unjust, the hedge funds, and was rather destructive in nature. The idea of diamond hands speaks a lot of the intent behind memeing GameStop—not to make loads of money, but to stick it to the man. Michael Burry, the author of the Big Short, rather eloquently explains his reasoning behind betting against the hollow mainstream, and his thinking regarding modern GME meme stocks.
He explained that the stock had among the highest short interest in the market, largely with short positions held by hedge funds. These funds would have to cover their positions in the event of a massive short squeeze, driving the stock much higher. Speculative investing can lift the value of meme stocks quickly—offering the opportunity to make money.
Meme stocks: What are they and why you should be careful buying them
The more traditional art market shares many of the oddities of NFTs and it is somewhat interesting to see Top Forex Brokers it finally released to the general public and mimicked in the open. A fact perhaps pointing to the latter is how coy they got about what they said in the tweet claiming they understood the short interest better than the general investing public. If you choose to agree with us and see the meme-stocks as an old phenomenon that simply got formalized recently, you might also agree that what happened in late 2020 is more of democratization, than inception. Essentially, while in the past only the rich and powerful could mobilize the masses through propaganda, now the power equally rests in the hands of the everyman. Musk has repeatedly used his somewhat cult-like following to propel or depress certain prices throughout 2021, perhaps most famously with dogecoin which Tesla will accept as payment.
- Former president Donald Trump’s social media company, Truth Social, could be considered a meme stock.
- In late 2021, Roundhill Investments launched the Roundhill Meme Stock ETF.
- “Ask your kid what they love about the content, and listen without judgment. That connection is your superpower.”
- The opinions expressed are the author’s alone and have not been provided, approved or otherwise endorsed by our partners.
A meme stock refers to the shares of a company that have gained viral popularity due to heightened social sentiment. This is usually due to activity online and particularly on social media platforms. These online communities can dedicate heavy research and resources toward a particular stock. On one hand, as we’ve said, ideally all prices should accurately reflect the state of the company they belong to. On the other hand, it isn’t like big-name investors haven’t been using online platforms to inform their audiences which stocks they were going to buy, which they were going to short, etc. As noted, the meme stocks phenomenon started in late 2020, when a group of retail investors using the online forum, Reddit, rallied around the US video game retailer, GameStop, causing its value to soar.
Investment vehicles
Investing in meme stocks may feel like a way to get something out of social media, but before you proceed any further, make sure you know the risks. Buying meme stocks isn’t investing; it’s trading, and it closely resembles gambling from multiple angles. Meme stocks lure investors with the promise of potentially big returns in little time. However, for those seeking sustainable long-term gains (the way real multigenerational family wealth is built up), look to build a portfolio of multiple meme stocks that have more than just a one-off chance of providing returns. Bear in mind that meme stocks can be especially volatile, so plan accordingly and be prepared to continue investing more over time. If you’re an investor looking for a longer-term holding (think years rather than days, weeks, or months), there are some important factors to consider before buying a meme stock.
The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. In some ways, getting wind of a meme stock is akin to hearing about it from a friend or relative, who may or may not have investing experience. “Meme stocks appeal to our fear of missing out (FOMO) and our desire to get rich quickly. Below, CNBC Select explains these types of investments, plus where you’re likely better off putting your money instead. Bed Bath & Beyond announced intentions to sell 12 million shares in a secondary offering in 2022 as meme stock promoters pumped the value of its stock. The stock fell steeply following the company’s announcement of the plan, however.
Notice how the stock jumped from $0.60 to $120.75, then dumped to $15. When some traders in r/WallStreetBets looked into the short position against GameStop, they realized what could be done. GameStop hit an unimaginable all-time high price of $483.00 per share in just a few weeks. Whichever ticker symbols are trending or being discussed in groups like r/WallStreetBets become meme stocks.
The trend originated within Italian meme communities but quickly expanded to a global audience, fueled by its accessibility, absurdity and DIY ethos, according to Mosele, who also runs an Italian brainrot account on Instagram. An interesting case comes in the form of Citron Research—a company with a vested interest in GME remaining shortable. In late January 2021, they tweeted that the Reddit crowd has a losing crowd and GameStop is about to crash down $20 very soon.
Stocks are sold short on margin because they involve borrowed shares. The short seller will begin to experience losses as the price of the shorted stock rises. These losses must be covered promptly and are often spurred by margin calls where the broker demands funds to make up for those paper losses.
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.” Commission-free trading attracted a significant number of retail investors with a limited understanding of the stock market. Online investing communities, such as those found on Stocktwits and Reddit, grew as the COVID-19 pandemic forced people to stay at home. At the height of meme stock frenzy, Robinhood—the upstart brokerage that, a few years earlier, led the charge on zero-commission stock trading—and other major brokerages throttled trading of several major meme stocks.
