After a brief lull, GameStop Corp. GME and other meme stocks are back in the spotlight, sparking a fresh wave of excitement and concern on Wall Street.
What Happened: Meme stocks, a term used to describe stocks that experience rapid and extreme price movements driven by social media, are once again making headlines. GameStop, the video game retailer at the center of the 2021 meme stock frenzy, has seen its stock price surge by 340% over the past 10 trading days, largely due to posts on the X platform linked to “Roaring Kitty” Keith Gill, a key figure in the previous meme stock craze.
Other companies, including AMC Entertainment Holdings Inc AMC, Koss Corporation KOSS, and Tupperware Brands Corp TUP, have also experienced significant increases in their stock prices. Many of these stocks are heavily shorted, and their fundamentals have weakened in recent years.
Despite the recent gains, these stocks have yet to reach the heights they did in 2021. GameStop’s shares, for example, soared by as much as 1,700% that year, while AMC’s surged by 2,850%.
“It’s hard not to use words like ‘insane’ when you look at this as a trader,” said Jay Woods, chief global strategist at Freedom Capital Markets, reported Reuters.
“The first time this happened, it was more of a movement, but right now this looks like a craze where people are saying, ‘Here’s an opportunity’ and ‘Let’s see if we can make a quick buck off of it.'”
Why It Matters: The resurgence of meme stocks has sparked a debate about the driving forces behind these volatile investments. Some industry experts, such as JJ Kinahan, CEO of IG North America, believe that the current rally is not driven by retail traders, as was the case in the past.
Others, like economist and former hedge fund manager Raoul Pal, argue that the surge has nothing to do with interest rates, as suggested by traditional finance theories.
Meanwhile, CNBC’s Jim Cramer has suggested that companies like GameStop and AMC could use the stock surge to raise capital through public offerings.
The renewed interest in meme stocks has investors wondering if this is the beginning of another wild ride, as Keith Gill’s return to social media has reignited interest in these potentially lucrative yet volatile investments.
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