• The US meme-stock frenzy, including GameStop, AMC, and other meme stocks, is experiencing a resurgence, driven by retail and institutional investors, leading to significant volatility and short-seller losses.
  • GameStop and AMC shares surged, but later dropped over 20% after GameStop announced plans to sell 45 million common shares to capitalize on the meme stock frenzy.
  • The resurgence is primarily linked to renewed activities by Keith Gill, known as “Roaring Kitty,” on social media platforms, who was a key figure in the Reddit Rally of 2021.
  • “Roaring Kitty” has the power to significantly influence stock prices, and his previous actions led to a congressional hearing and changes in trade-processing cycles, while retail investors who follow his lead may face financial risks.
  • Retail investors betting on GameStop and AMC Entertainment may not profit, but stock exchanges like Cboe Global Markets, Intercontinental Exchange, and Deutsche Borse AG will profit from the frenzied trading.
  • Meme stocks popularized on social media platforms like Reddit and Twitter continue to attract retail investors seeking quick profits, leading to a surge in trading activity.
  • The GameStop situation in 2021 changed the game for short sellers, making it difficult to bet against popular stocks, and the situation highlights the thin line between regulated stock markets and speculative crypto markets, with market irrationality and human behavior being inevitable elements in stock markets.
  • Companies are taking advantage of market disruption by offering new shares quickly, and GameStop expects a drop in net sales for the first quarter, with a narrower net loss than last year.
  • Institutional investors are also participating in the surge of GameStop and AMC shares, and traders looked for other stocks beyond these meme stocks, with SunPower, BlackBerry, Lucid Group, and Virgin Galactic also rallying.
  • Companies are using quicker secondary offerings to capitalize on market disruption, which can blunt price rises by supplying additional new shares, and analysts caution that GameStop, AMC, DoorDash, Robinhood, Tilray Brands, and Beyond Meat are still in the “danger zone” despite recent improvements.
  • Experts remain skeptical about the longevity of this surge due to broader economic context, and the former chairman of the Securities and Exchange Commission expressed concerns about the meme stock craze.
  • Sources:
    Financial Times (ft.com)

    Reuters (Japanese) (jp.reuters.com)

    CNN (cnn.com)

    The Washington Post (syndication.washingtonpost.com)

    The Economic Times (economictimes.indiatimes.com)

    CNBC (cnbc.com)

    Bloomberg (bloomberg.com)

    FT Alphaville (ftalphaville.ft.com)

    New York Post (nypost.com)

    Axios (axios.com)

    Newsweek (newsweek.com)

    CBS News (cbsnews.com)