One of the biggest stories in the financial world this year has been the rise of so-called 'meme stocks', where people have been encouraged to invest in certain companies by others on social media. After the stratospheric rise of the previously struggling GameStop hit headlines in January, the popularity of meme stocks caught the attention of the wider financial industry and regulators alike. But have these meme stocks held their value or have people lost money after their 15 minutes of fame ended? Read on as we look at the companies involved and what happened next. All dollar values in US dollars.
GameStop is an American gaming retailer that was launched in Dallas in 1984. Although it’s the biggest video game retailer in the world, the company struggled as e-commerce brands started to outperform bricks-and-mortar shops, a switch accelerated by the COVID-19 pandemic. GameStop staged a high-profile comeback in late January 2021 when it became the world’s first so-called 'meme stock'. This was driven by the participants of a thread on the social media platform Reddit called r/wallstreetbets.
People on r/wallstreetbets began speculating that GameStop was undervalued and hedge funds were shorting its stock and making a fortune. Shorting is the process of selling borrowed stock in bulk with the aim of buying it back cheaper after the price has fallen. As users flocked to buy the stock and news of the rocketing share price spread, the price was pushed up by a staggering 1,500% in just one week, hitting highs of $347.51 (£254.93) on 29 January.
Before the short squeeze – a rapid price increase fuelled by short selling – GameStop was priced at around $17 (£12.47). Although its price crashed in February as early investors sold their stock, it bounced back and has remained above $100 (£73.35) since March, with a current value of $185.16 (£135.17). The company has recently doubled its US distribution space and plans to focus on expanding its product catalogue and selling more online. But investor confidence remains shaky. According to Yahoo Finance, GameStop's Reddit mentions have plummeted since August 2021, perhaps because the company hasn't been open about the next stages in its financial plan.
AMC Entertainment Holdings is the largest cinema chain in the world, with more than 10,000 screens across Europe and the US. Unsurprisingly, it was hit hard by the COVID-19 pandemic and stay-at-home orders and lockdowns around the world. In June 2020, AMC released a statement saying there was "substantial doubt" the company would survive, especially as film studios such as Universal Pictures were choosing to make new releases available on streaming services.
The cinema industry is still struggling. US takings across four weekends in July-August 2021 were 51% lower than takings from the same period in 2019. But AMC remains hopeful. Attempting to engage the company’s new young investor base, CEO Adam Aron has teased a potential partnership with GameStop, announced that the chain will accept cryptocurrency payments, and even pulled a bizarre PR stunt by appearing not to wear trousers during a Zoom call. AMC's stock is currently trading at around $40 (£29.21) and the chain now has cash reserves of $1.81 billion (£1.33bn), a remarkable turnaround after entering the pandemic $4.5 billion (£3.3bn) in debt.
Hot on the heels of GameStop and AMC, the $5.6 billion (£4.1bn) business quickly became one of the most-mentioned stocks on r/wallstreetbets, triggering a short squeeze that sent its stock price to $17.80 (£13.07). This was followed by ‘short squeeze 2.0’, a resurgence of interest in May and June 2021 when its trading volume doubled to 6.37 million. BlackBerry is currently trading at around $10.38 (£7.58), around double its average stock price in 2020.
Although its recent bull runs don’t appear to have been triggered by anything more than increased social media mentions, some people argue that BlackBerry isn’t a true meme stock because the company has fundamental value. As well as its shift towards security systems, the Canadian company has partnered with OnwardMobility to release the BlackBerry FLEX 5G, its first smartphone since 2018. The device will be released before the end of 2021. According to Reuters, BlackBerry has seen strong demand for its cybersecurity products this year, thanks in part to the rise of remote working. But some analysts believe it could be hit hard by the global chip shortage, as its software clients include Volkswagen, BMW, and Ford.
In January 2021, as the stock price of GameStop soared, the trading app Robinhood came under fire for halting GameStop trades on its platform. The move sparked accusations that trading companies and hedge funds were trying to manipulate the market, preventing everyday investors from cashing in on Wall Street’s misfortune. But after this rocky start, Robinhood has redeemed itself to many meme stock investors – and even become something of a meme stock itself.
In the wake of the GameStop situation, Robinhood was fined a record-breaking $70 billion (£51 billion) by the US Financial Industry Regulatory Authority (FINRA). The regulator criticised Robinhood's handling of GameStop stock, as well as its interface, which was deemed unsuitable for the more inexperienced investors Robinhood targets. On 1 July, just one day after it was hit by the fine, Robinhood filed to go public on the Nasdaq stock exchange. It advertised its initial public offering (IPO) by selling T-shirts in a pop-up kiosk on Wall Street.
After an underwhelming start on the stock exchange, Robinhood became the third most popular stock among retail investors on 4 August. However, its performance doesn't rival that of GameStop or AMC, both of which sold hundreds of millions of dollars' worth of shares at their peak, and some analysts believe its success will be short-lived. CEO Vlad Tenev (pictured) might have admitted Robinhood’s response to the GameStop short squeeze was "unacceptable" but anti-Robinhood sentiment remains strong among some on Reddit. The company is currently under investigation because Tenev isn't licensed by FINRA and is also facing lawsuits from previous GameStop investors, who are seeking damages, interest, and legal fees. Its stock price is currently $44.91 (£32.78).
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