It’s like 2021 all over again — at least, in one bullishness-on-steroids corner of the stock market.
Several “meme stocks,” or companies whose shares are buoyed by social media buzz rather than traditional business fundamentals like growth and profits, surged ahead of the start of trading on Tuesday. It’s the second consecutive day that such stocks have popped in the stock market, following GameStop’s 72% surge on Monday.
Other favorites with WallStreetBets, the Reddit forum that spurred the meme-stock craze three years ago, jumped in pre-market trading on Tuesday. Among them are movie-theater operator AMC Entertainment, whose shares soared 78% in premarket trading, and BlackBerry, with a 26% gain. GameStop shares spiked more than 130%.
The resurgence of the meme stock phenomenon comes as trader Keith Gill, also known as “Roaring Kitty,” resurfaced on X (formerly Twitter) after a three-year hiatus, posting a sketch Sunday night of a man leaning forward in a chair. Gill became the face of meme stock traders after he bought GameStop shares for $53,000 in 2019 and reportedly turned it into a multi-million stake due to the hype around the stock.
Once again, traders are posting about meme stocks on WallStreetBets, urging others to buy stakes in GameStop and additional meme favorites with the term YOLO, or “you only live once.” Others posted screenshots of their gains from AMC, BlackBerry and additional stocks.
Other stocks that are getting a lift in the meme stock resurgence include:
- SunPower Corp., a photovoltaic solar energy company, whose shares jumped more than 107% in premarket trading
- Plug Power, a company that makes hydrogen fuel cell systems, with a 43% gain
- Virgin Galactic, Richard Branson’s spaceflight company, up 16%
- Beyond Meat, the maker of plant-based foods, up 20%
In the case of SunPower and Plug Power, the companies may also have drawn interest from traders due to President Joe Biden’s announcement of new tariffs on Chinese EVs, solar cells and other products.
“Extremely speculative”
The appeal is simple: the opportunity to make a quick buck in a short period of time, with the bonus of sticking it to the professional traders on Wall Street who have shunned meme stocks.
“[W]e expect day traders will 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), jack the price up and then they can sell off and make a quick profit,” noted Nigel Green, the CEO of the financial advisory firm deVere Group, in an email.
But there are very real risks, Green added.
“Of course, big, big money can be made by some,” he said. “But let’s very clear: This is extremely speculative, and valuations can be expected to be incredibly wild — in both directions.”
Among the immediate casualties aren’t retail investors, but rather hedge funds and other traders who had bet that GameStop’s stock would decline. Such a strategy, called short selling, involves a trade that will make money if a stock declines — investors lose money if the shares tise.
On Monday, hedge funds with short positions in GameStop lost more than $1 billion, analytics firm S3 Partners told CBS MoneyWatch.