What was thought to be a passing phenomenon, the so-called memetic stock market turbulence seems to be taking hold.
Last year, GameStop and AMC Entertainment were leaders in the meme stock craze. This month, Bed Bath & Beyond, whose stock price has soared and dropped sharply, is in the spotlight.
The retailer’s shares surged nearly 360% from early August to Wednesday, cutting that gain in half by the end of this week. It was the most traded stock on Fidelity Investments’ trading platform as of Friday afternoon.
The volatility in Bed Bath & Beyond’s share price followed a rise in the share price of a Hong Kong-based company called AMTD Digital, which rose more than 21,000% in early August to peak above $1,600. After that, it fell to $180.
AMC shares have seen renewed interest in recent weeks, along with shares in financial services firm Magic Empire Global and grill maker Weber. But what’s fueling the recent meme craze?
The move reflects a trend that first emerged at the height of the pandemic. Stock trading was aided by low-cost apps like Robinhood that facilitated trading. At the time, memetic stock trading was thought to be by hobbyists stuck with checks to fuel their household budgets in order to overthrow Wall Street trading firms they felt were rigging the financial system. But even as pandemic restrictions are lifted, memetic strains continue to garner attention.
“The view of having more time on hand and cash from stimulus checks is more complex and what I think is more tied to the easing of financial conditions,” investment director Alex Leonard said. It’s a simple explanation of what’s going on,” said Raf in London.
Trading ferocity appears to be disconnected from the underlying health of the company investors are betting on. But experts say that at least some of the driving forces behind the broader market rally over the past two months are at work.
Inflation has fallen, the Fed may ease pace of rate hikes, and signs that the U.S. economy remains strong will boost investor confidence and ease restrictive financial conditions is starting to After weathering the worst crash of the year, memetic stock traders are also back on the market.
Americas head George Cattrambourn said: “Retail investors saw the rally last month from their June lows and want to be a part of it, and frankly don’t want to miss the chance. I think it has a lot to do with being afraid,” he said. Trading and Chief Operating Officer of DWS Group.
The memestock target type remains the same. Typically, the focus is on companies with a small number of shares outstanding (companies with easy price volatility) or underperforming companies that traditional investors have been betting on. Memetic stock traders flock to social media platforms like Reddit to try to boost stock prices, punish others who bet on the collapse of their favorite companies, and exact revenge on what they see as the ruling establishment. .
Chris Murphy, co-head of derivatives strategy at Susquehanna Financial Group, said: “I think the ability to share information, the fear of missing out, and the ability to coordinate online transactions is underrated.”
Joe Saluzzi, co-founder of Themis Trading and a follower of high-frequency trading issues, observed the recent rally in meme stocks from the sidelines. Meme gatherings have become part of the market, he said, but appear to be shrinking in size. For example, AMC’s market value soared to nearly $27 billion when he emerged as a memetic stock in mid-2021. But Bed Bath & Beyond’s market cap only increased by $1.4 billion this week.
Regulators have not yet intervened. Saluzzi says the SEC has taken a long look at GameStop and hasn’t made any changes yet, but SEC Chairman Gary Gensler said he plans to trade more stocks in June. centralized, he said. Individuals are fairer.
“I don’t know what you’re trying to do,” Mr. Saluzzi said. “Trading is trading and people like it. I don’t know if I can tell them not to.”