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Meme Stocks Are Surging Again: Here’s Why
In an unexpected throwback to the 2021 trading frenzy, GameStop and AMC Entertainment shares are experiencing a significant surge this week.
The resurgence is linked primarily to renewed activities by Keith Gill, known as “Roaring Kitty,” on social media platforms, which have historically influenced so-called “meme stock” movements.
The Context
In January 2021, the phenomenon of “meme stocks” took the financial world by storm, with stocks like GameStop and AMC Entertainment experiencing extraordinary price jumps.
This was largely driven by retail investors on social media platforms, particularly Reddit, who orchestrated massive buying sprees.
These actions led to significant short squeezes, where short sellers were forced to purchase stocks at high prices to cover their positions, further driving up stock prices.
This not only disrupted traditional market dynamics but also prompted scrutiny from regulators and discussions about market fairness and the role of social media in stock trading.
After nearly three years of not posting on X, formerly Twitter, “Roaring Kitty,” returned late Sunday with the first of a series of cryptic posts.
What We Know
This re-engagement sparked a dramatic rise in GameStop and AMC stocks, reminiscent of their previous peaks.
On Tuesday, GameStop shares were up more than 74 percent, marking a return to the spotlight for the video game retailer, while AMC saw an impressive 91.5 percent increase in share price.
Both stocks are up more than 200 percent since May 8.
Cinema chain AMC, which has struggled since the pandemic, cashed in on the revived meme stock craze, raising $250 million in share sale completed on Monday.
Other stocks typically favored in the meme rallies, such as BlackBerry and Koss, also showed notable increases.
There were reports that short-sellers were set to lose more than a billion dollars.
Views
Experts remain skeptical about the longevity of this surge, given the broader economic context of rising interest rates and inflation.
Matthew Tuttle, CEO of Tuttle Capital Management, told Reuters: “The fact that Roaring Kitty is back should be totally meaningless to the stock market, but the fact that it isn’t is fascinating.”
Former chairman of the Securities and Exchange Commission Jay Clayton said the meme stock craze bothered him, during an interview on NBC Tuesday morning.
“It’s a lot closer to gambling than it is to trading. And it’s certainly not investing,” he added.
What’s Next
While the immediate impact has been beneficial for holders of GameStop and AMC stocks, the overall sustainability of such gains is questionable; the meme stock frenzy of three years ago soon subsided.
In the coming weeks, analysts will likely continue to dissect the influence of social media figures like “Roaring Kitty” and the implications for market regulation and investor behavior.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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