At least in some bullish corners of the stock market, it looks like 2021 has begun all over again.
Several “meme stocks” — companies whose shares are buoyed by social media buzz rather than traditional business fundamentals like growth or profits — soared ahead of Tuesday's open. This is the second day in a row that such a stock has appeared on the stock market, following GameStop. 72% jump on monday.
Other favorites wall street bet, the Reddit forum that sparked the meme stock boom three years ago, soared in premarket trading Tuesday. Those include movie theater operator AMC Entertainment, whose stock soared 93% in Tuesday morning trading, and BlackBerry, whose stock rose 17%. GameStop shares soared more than 73%.
The resurgence of the meme stock phenomenon occurred after trader Keith Gill, also known as “Roaring Kitty,” reappeared on X (formerly Twitter) after a three-year hiatus and posted the following: Ta. sketch A man leans forward in his chair on a Sunday night. Gill became the face of the meme stock trader after he reportedly bought GameStop stock for $53,000 in 2019 and turned it into millions after getting hyped for the stock.
Traders once again posted about meme stocks on WallStreetBets, using the phrase YOLO (“You only live once”) to encourage others to buy GameStop stock and additional meme favorites. ing. Some people posted screenshots of their profits from AMC, BlackBerry, and other stocks.
○Stocks that are rising due to the meme stock resurgence include:
- Shares of solar power company SunPower Inc. soared 60% in early trading Tuesday.
- Plug Power, a company that makes hydrogen fuel cell systems, rises 34%
- Richard Branson's spaceflight company Virgin Galactic rises 31%
- Plant-based food maker Beyond Meat rises 28%
In the case of SunPower and Plug Power, the companies may also have attracted trader interest due to President Joe Biden's policies. Announcement of new prices About EVs, solar cells, and other products in China.
“Highly speculative”
The charm is simple. There's an opportunity to make some quick money in a short period of time, with the added bonus of selling it to professional Wall Street traders who have shunned meme stocks.
”[W]I'm expecting a surge of day traders, not because they think the meme has any real value, but because others are feeling FOMO (fear of missing out) and driving prices up, then selling quickly. Because we expect to be able to make a profit. '' Nigel Green, CEO of financial advisory firm De Vere Group, said in an email.
But there are also very real risks, Green added.
“Of course, some people will make a lot of money,” he says. “But to be clear, this is highly speculative and we expect valuations to be incredibly volatile in both directions.”
Immediate victims include not individual investors but also hedge funds and other traders who had bet on GameStop's stock to fall. Such strategies, known as short selling, involve trading in which a profit is made if the stock price falls, but the investor loses money if the stock price rises.
Hedge funds with short positions in GameStop lost more than $1 billion on Monday, analytics firm S3 Partners told CBS Money Watch.
Ihor Dusaniowski, managing director of predictive analytics at S3 Partners, wrote in a blog post that some meme stocks have a high percentage of short interest. For example, he noted that approximately 65 million shares of Game Stock are currently sold short, representing approximately 24% of the available shares.
Such companies tend to attract meme stock investors because of their potential to mount a so-called “short squeeze.” This can occur when the price of the shorted stock increases, forcing the short seller to cover his position by buying more stock, resulting in an increase in the stock price.
'Squeezed' by sharp rise in GameStop stock [short sellers] Gets out of position due to buy to cover push [GameStop’s] The stock has momentum and is moving higher than any day trader could do on his own,” Dusaniwski wrote.
