That can make it even more difficult for parents to understand where the boundaries are. “While it might look like nonsense to us, it’s often a creative outlet for kids,” Eskin explained. “It’s play, rebellion, and identity-building all rolled into a surreal meme. But if your kid can’t focus in class or gets agitated without constant stimulation, that’s a cue that it’s time to intervene.” But Eskin warned that the pace and intensity of this kind of content can be overstimulating.
And yet it is nearly impossible to really say that the GameStop craze wasn’t a planned and manipulative scheme that worked out far better than expected. Many of its most enthusiastic early hype men have reportedly been bullish on GME for years and would greatly benefit from success. Ultimately, while Keith Gill’s former employer did have to pay a fine, and many charges and threats of charges have been made, no true impactful legal action has been made.
The Role Of Social Media And The Hype Cycle
- After a new frenzy that drove prices up, investors started selling off their holdings once more.
- A meme stock is any publicly traded stock with a price performance that’s strongly influenced by activity on social media.
- We know that you’ll walk away from a stronger, more confident, and street-wise trader.
- BlackBerry’s share price soared from $6.63 to $14 within the space of a month during January 2021’s meme stock frenzy, before steadily declining.
- Providing access to our stories should not be construed as investment advice or a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction by Forbes Advisor Australia.
However, Forbes Advisor Australia cannot guarantee the accuracy, completeness or timeliness of this website. They should all be viewed as bubbles until proven otherwise—until the craze is over, the prices are stabilized, and other indicators of technical and fundamental analysis tell you they are realistic. Until that point, they are only driven by the current increase in popularity, and potential panic this might cause among the short-sellers.
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- You can sell an investment by logging into your investing platform account, tapping the share you want to sell.
- Add in a pandemic, a surge in new investors who grew up online, and the ease of stock trading on new apps such as Robinhood Markets (HOOD 4.48%), and all the right ingredients came together to create a viral meme stock movement.
- These short-term surges can often reverse course just as quickly, though, making meme stocks far more volatile than average stock market moves.
- Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
- The price performance of meme stocks is generally not based on changes in the underlying company’s fundamentals or financial performance.
GameStop and other such meme stocks are publicly traded equities whose stock price is heavily influenced by social media. “Both prices and trading volumes of meme stocks may be exceptionally volatile, as the hype on platforms like Reddit can cause spikes in demand,” Britannica Money also wrote. Unlike with traditional stocks you may invest in, the price performance of a meme stock is generally not based on the company’s underlying fundamentals. Meme stocks became a hot investment theme for day traders and retail investors early in 2021, resulting in short squeezes on hot stocks such as GameStop Corp. (GME) and AMC Entertainment Holdings, Inc. (AMC). These stocks are named after the virality of internet memes found on social media and saw online communities form around them to boost and hype their prospects even though meme company fundamentals remained questionable. Former president Donald Trump’s social media company, Truth Social, could be considered a meme stock.
I mentioned this as an important characteristic of a meme stock earlier, and now you can see why. The ultimate goal of many meme stocks is to initiate a short squeeze. First, the stock must have many short-sellers banking on the stock’s price to fall. Is the stock volatile because it is a meme stock, or is it a meme stock because it is volatile? Either way, meme stock investors embrace the turbulence and live for the double-digit swings in either direction.
Meme coins: serious talk about this cryptocurrency that’s built on internet jokes
Their independent actions have been shown to collectively initiate short squeezes in heavily shorted names. Meme stocks can become overvalued relative to fundamental technical analysis as a result. The level of social media interest, and resultant real-world trading activity, helps to identify which stocks can be considered meme stocks. Once the online buzz about a stock reaches a tipping point, via mentions and memes, its popularity may lead to a rapidly inflating share price. One of the predicting factors of the meme stock revolution has been to raise the price of a stock through a short squeeze.
What are the top meme stocks?
It was the gaming retailer GameStop (GME) that drew the most attention. The investment research and financial services firm Morningstar reported that meme stock investing was especially popular with younger investors who shunned traditional investing strategies. “In some cases, meme-stock investors saw opportunities to react against short sellers who were looking xrp (ripple) trading for a stock to decline. Other meme-stock companies from the first wave were AMC (AMC), BlackBerry (BB) and Bed, Bath and Beyond.
GME and Market Manipulation 💰
With the ticker symbol MEME, the exchange-traded fund tracked the performance of stocks with elevated social media activity and high interest from short sellers. The ETF invested in GameStop, AMC, BlackBerry, and Digital World Acquisition Corporation (DWAC)—the special purpose acquisition company (SPAC) working to acquire former president Donald Trump’s Truth Social platform—at its launch. Within a couple weeks, social media users flocked to the Wall Street Bets forum to join the conversation and participate in the hype. Other stocks, like AMC Entertainment (AMC), Bed Bath & Beyond (BBBY), Blackberry (BB), and Nokia (NOK), became targets of rampant speculation—and their prices fluctuated accordingly. Some companies, like the movie theater chain AMC, embraced their meme stock status by leaning into it across social media platforms (see figure 1).
But to think it will continue to happen might be too much to ask for. Hedge funds will likely be more careful with the stocks in which they build short positions. This means that the Reddit Rebellion was likely a once-in-a-lifetime opportunity.
For one, in cases like Game Stop or Bed, Bath and Beyond, the price of shares can rise tremendously based exclusively on online narratives and not on the fundamental valuation of the stock. The meme stock community can build considerable clout around a share through online conversation on sites like How to Invest in Index Funds Facebook, Twitter and Reddit. This can sometimes lead to an overvaluation of the stock as communities attempt to drive up the price of normally shorted shares.
Though there is a potential for monumental gains, meme investors are more likely to experience potentially bigger losses as the stocks become overvalued and their price dramatically plummets. Back in 2021, thousands of retail investors bought shares in the heavily shorted GameStop (GME), based largely on conversations held in the Reddit forum ‘WallStreetBets’. The rapid increase in GME’s value forced many hedge funds to exit short positions at a significant loss.
What Are the Best Known Meme Stocks?
Meme stocks are often hard to borrow with a high short-interest ratio. Meme stocks often have heavier discourse and analysis in discussion threads on websites like Reddit and posts on platforms such as X (formerly Twitter) and Facebook. As for the “brainrot” part, that term has become internet shorthand for content so overstimulating, surreal or ridiculous that it essentially melts your brain, intentionally. Regulators have taken notice, but the legal landscape remains murky.
This entitles UK investors a 30% discount on any US tax they pay on dividends from the shares. Each investment platform has a slightly different process, but you’ll typically need to type the name of your chosen company – or its stock market ticker symbol – into a search bar. Investing in regular instalments allows investors to benefit from ‘pound cost averaging,’ an investing technique which helps investors pay less per share, on average, overtime in a falling market. In January 2021, Nokia’s share price jumped 106%, causing a short squeeze. Like GameStop, however, its price subsequently declined, alpari review settling around the $4 mark by late 2022.
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