What are meme stocks and why are they back? Social Media News

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The company has guided for adjusted EBITDA of $1.4 billion and $2.1 billion, respectively, in 2026 and 2028. As cash flows swell in the coming years, DKNG stock will likely trend higher. The first reason to be bullish is the potential growth in car deliveries.

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  2. Robinhood’s CEO said the restrictions were to help the brokerage meet increased regulatory deposit mandates.
  3. The result was what’s known as a short squeeze, in which the price continued to climb as short sellers (notably the hedge funds) desperately tried to buy back shares before the price increased even more.
  4. Meme stocks often have heavier discourse and analysis in discussion threads on websites like Reddit and posts to followers on platforms like X (formerly Twitter) and Facebook.
  5. In August, Bed Bath & Beyond announced a financial restructuring and dilutive share offering.

If you’re an investor looking for a longer-term holding (think years rather than days, weeks, or months), there are some important factors to consider before buying a meme stock. Some business fundamentals and economic trends can go a long way toward balancing out what can be fleeting social media trends or hopes of a short-term short squeeze. When you’re ready to buy stocks, your first need to open a taxable brokerage account. Robinhood and Webull are two popular trading platforms for active investors, boasting easy-to-use mobile investing apps. Plus, they offer IRAs (traditional, Roth and rollover) so users can manage their retirement funds along with their stocks all in one place.

Meme stocks can be bought and sold using an online brokerage account, just like any other stock. Because many meme stocks to date have traded exclusively on U.S. exchanges, Canadian investors may incur higher trading fees than they would for companies trading in Canada. Phone maker Nokia began being discussed on WallStreetBets in January 2021 due to the large number of hedge funds and institutional investors who had shorted its stock. Of all the meme stocks, Nokia had the largest market cap and it operated in more than 130 countries worldwide. People learned major investing lessons during the craze, whether investors made money from meme stocks or not.

Short selling is when somebody sells shares that they do not own, hoping to buy them back at a lower price. That seller must borrow shares from somebody who is long the stock in order to sell them. As more and more shares are sold short in this way, there are fewer shares left available to borrow. Once a stock becomes hard to borrow, even the most motivated short seller may be unable to do so.

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As EBITDA margin improves on operating leverage, I expect TLRY stock to trend higher. Further, the addressable cannabis market is significant, with federal legalization as a big impending catalyst. Meme stocks have been known to drop down by 30% umarkets review or more in a single trading session, and these swings can wipe out an entire account in a matter of days. Perhaps the most important part of the equation, the average Robinhood account, which is only around $5,000, has to be able to afford it.

Because a surge in buying activity can send a stock price soaring, there are some benefits to owning meme stocks (and potential meme stocks before they rocket higher). The name is lent to this particular kind of stock as the shares earning the title have been chosen and widely discussed in online communities. The first meme stock is largely considered to be struggling gaming company GameStop, which in early 2021 rose sharply in price as members of the sub-thread “r/wallstreetbets” on Reddit orchestrated a massive “short-squeeze.” The meme stock community can build considerable clout around a share through online conversation on sites like 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.

Meme Stock

The first prominent example of a meme stock in 2021 was struggling video game retailer GameStop (GME). The stock traded $19 per share at the start of the year, but by January 28, it hit an all-time high of $483 per share. Another similar short squeeze occurred during the summer of 2022 when meme stock communities drove up the price of the Bed, Bath, & Beyond (BBY) shares by 314%.

In 2020, some stock trading enthusiasts became aware of some hedge funds’ short selling of GameStop and other stocks and decided to take the risky move of trying to exploit those positions. This effort was led by a community of amateur stock traders on the social media site Reddit, specifically the subreddit (forum) /r/WallStreetBets. Their plan involved buying large amounts https://forex-review.net/ of GameStop stock, using online trading platforms such as Robinhood. In 2021, the sudden buying spree caused GameStop stock to quickly rocket upward in price. The result was what’s known as a short squeeze, in which the price continued to climb as short sellers (notably the hedge funds) desperately tried to buy back shares before the price increased even more.

Bed Bath & Beyond

Now, this was back in 2019 before all of this craziness happened. As a result of this situation, meme stock became a popular term to use to refer to trendy stocks experiencing sudden popularity. The once king of the mobile phone business was left for dead when Apple launched its iPhone. The company shifted to a cyber security and software company due to its hundreds of patents, but it hasn’t ever managed to regain the success it once had. BlackBerry has the nostalgia for meme stock traders, and while it has seen some mini squeezes, it has never managed to reach the same levels of AMC or GameStop.

Risking money in speculative investments can be exhilarating, but it is rarely the path to long-term wealth. Investing in low-cost index funds and through tax-advantaged retirement accounts such as IRAs has a higher likelihood of success than relying on risky investing strategies. GameStop may have started the meme stock mania, but others have followed in its footsteps. Below are the five best-performing stocks in the Solactive Roundhill Meme Stock Index, ordered by one-year returns.

Examples of meme stock

So AMC, when all this craziness started, was trading at around $10. And if you look at companies like Clover, they were trading around $8 – $10. This is where we have seen stocks that have been hyped up recently to go down on WallStreetBets they talk about paper hands and diamond hands. If you go back and take a look at the current prices, at the time of this writing, which was around $200, this position was worth nearly 44 million dollars.

However, a short squeeze can occur when those borrowed stocks rise in price rather than fall. Short selling is when an investor—often an institutional investor like a hedge fund—borrows a stock and sells the shares with a plan to buy it back later to return. When someone shorts a stock, they’re betting the stock price will go down between the time they sell and repurchase the stock. GameStop (GME) became a heavily shorted stock due to a decline in foot traffic at malls and dwindling revenues. The short interest, therefore, had grown to over 100% of the shares outstanding.

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Rivian has had hiccups getting its R1T electric truck out the door, but it’s making progress. This particular meme always starts with the words, “One does not simply…” at the top, and usually something humorous at the end, implying that whatever the person is trying to do is complex, or un-doable. A “meme” is a term referring to a tidbit of culture — photographs, videos, phrases — that spread rapidly online through social sharing. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.

The hedge fund Melvin Capital lost nearly $7 billion, more than half its capital, by short selling GameStop and other meme stocks. Ultimately, it needed to be propped up with capital infusions from asset managers Citadel and Point72 Asset Management. Typically, the meme stock cycle begins when a retail investor blogs favorably about the company’s prospects while downplaying the reasons the stock has declined.

As you can see, the reason why they are called meme stocks is that the community communicates through memes. Pretty much every post beside a few account screenshots is memes. Use of the term meme stock was popularized by users of the subreddit /r/WallStreetBets. Where were you in January of 2021 when the meme stock phenomenon first started with AMC and GameStop stocks? While these are the two most well-known of the meme stocks, there is actually a substantial list of companies that qualify. Investment Plans (“Plans”) shown in our marketplace are for informational purposes only and are meant as helpful starting points as you discover, research and create a Plan that meets your specific investing needs.