Return of the Meme Stocks
May 17, 2024
By Samuel Richter, CFP®
Senior Securities AnalystMeme-stocks experienced a brief resurgence last week. This brings back memories of chaotic times for stocks like GameStop and AMC Entertainment back in 2021. Before we look at what happened last week, lets discuss what a “meme-stock” is and look back on 2021.
According to Investopedia, a meme stock refers to a company that has gained viral popularity due to heightened social sentiment. The social sentiment in this case came from social media sites like Reddit, X (formerly Twitter), and Facebook.
History of Meme-Stocks
Back in 2021, meme-stocks became popular for retail investors looking to join in on the returns seen on social media posts. It’s important to remember that people are more likely to post their successful trades than post about when things don’t go as planned. Some who joined in on the craze and bought shares as prices of GameStop and AMC Entertainment rocketed were not as lucky. Some ended with significant losses, as they continued to hold on when the stock price fell back down to earth.
GameStop reached an adjusted stock price of over $85 at its peak in 2021. At the beginning of this May, it fell back to roughly $11. AMC Entertainment reached an adjusted stock price of $421 at its peak in 2021. At the beginning of May, it was trading around $3. Respectively, these were drops of 87% and 99% from the peak.
Meme-Stocks Today
Meme-stocks surged again last week, but not to the level of 2021. One of the “leaders” of the meme-stock craze on social media posted again after a long hiatus. This led many on social media to discuss and purchase these stocks again, reminiscent of 2021. However, it did not reach those levels and the rally fizzled quickly. GameStop rose 127% early last week to over $39. By the end of the week, it had fallen back to around $22. AMC Entertainment had a similar path. It rose 88% early in the week to roughly $5.50. By the end of the week, it had fallen back to $4.40.
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