The Meme Stock Revolution is Growing

AMC Entertainment and GameStop have been the main companies in the spotlight for the meme stock revolution that is currently unfolding in front of our eyes. But there have been quite a few other companies that have experienced similar rises in their stock prices thanks to Reddit, WallStreetBets, and the Ape revolution. The fast-food restaurant chain Wendy’s has become one of the latest companies to have the spotlight on it and experience a meteoric rise in their stock price.

BlackBerry, Workhorse, Sundial Growers (SNDL), and Bed Bath & Beyond were all meme stocks involved in the original short-squeeze events that happened at the end of January and beginning of February this year, 2021. GameStop led the way during this time in January because was in the news the most for having the largest jump in price. GameStop (GME) was trading around $17 at the beginning of the year in January and experienced an incredible meteoric rise that saw its peak price of $347 on January 27th. The price experienced an immediate drop in price and by the end of the following week, it was trading around $60. Like GME, all of these meme stocks saw explosive growth followed by an immediate drop in price but they have all been trading much higher than they were prior to the January short-squeeze.

The fast-food chain that’s home to the Frosty and Baconator, Wendy’s (WEN), and Clover Medical (CLOV) are the newest companies to be added to the meme stock watchlist. Unlike its fellow meme stocks, Wendy’s has not really been struggling and has enjoyed a fairly stable stock price. According to Yahoo Finance, Wendy’s only had about 4.64% of its outstanding shares being sold short. This counters the meme stock norm where they have been the targets of hedge funds short selling and trading options on them betting that their stock prices will go down.

This recent retail investor revolution has done more than make some people a lot of money. This fight against the hedge funds for their extreme short selling of companies has exposed the prevalent problem on Wall Street of naked short selling and synthetic shares. Both of these practices are illegal, but it has become apparent that Wall Street has been doing it anyways. Naked shorts and synthetic shares involve a big bank or brokerage, like JP Morgan or Robinhood for example, selling “borrowed” shares before they have actually located and borrowed the shares to sell. When this happens, the sellers are making money off shares that do not actually exist, or synthetic shares.

I think it is awesome how the retail investor community that refers to themselves as Apes, has not only fought the hedge funds and won billions of dollars away from them, but they have exposed this illegal practice. What are your thoughts? Leave a comment below.

Photo by Batu Gezer on Unsplash

Friday’s Weekly Market Wrap Up 5/28/21

The biggest news from this past week has been the resurgence of the infamous meme stocks GameStop (GME) and AMC (AMC). As you may remember, back in January GameStop was made famous when the Reddit group WallStreetBets and in particular a user named Roaring Kitty, urged retail investors to buy and hold the stock because it was being short sold by big hedge funds. I went into detail about the whole situation in a previous blog post.

Prior to the stock reaching its peak price of $347.51, it was selling around $10-$15 per share. Within less than a two-week span, the stock price shot up more than 10 times its normal trading value and then came crashing back down. At the same time, AMC’s stock price was trading around $2 per share and shot up to $19.90. Both stocks have been trading higher than previously but nowhere near their all-time high prices. There was another bull run on these stocks in mid-March and then prices lowered again.

These two companies, AMC in particular, were the subject to another bull run driven by retail investors who are countering hedge funds attempting to short sell the stocks again. AMC started the week around $12 per share and is ending the week at $26. GameStop went from around $170 at the beginning of the week up to $222 to end the week. AMC’s stock price more than doubled in one week!

In other news, the crypto market has been on a downward spiral lately, and the announcement that came out on Wednesday regarding Iran banning bitcoin mining due to power outage problems didn’t help. Many large cities in Iran have been experiencing daily power outages and Iranian officials blame part of the problem on bitcoin and other cryptocurrency mining. This ban is effective immediately and will be in place until September 22nd of this year.

Do you think the crypto market will bounce back even after Iran and China have recently banned cryptocurrencies? What’s your thoughts on the rise of memes stocks like AMC and GameStop? Leave me a comment and let me know your thoughts. Don’t forget to follow me on social media, I post investment news every weekday on my Twitter.

Photo by Michael Förtsch on Unsplash

Investing 101: Short Sales and Game Stop

Bull. Bear. Short-selling. Hedge fund. Why is everyone obsessed with Game Stop?

There has been a lot talk about the stock market in the news lately and sometimes it’s hard to understand what everyone is talking about. I wanted to help clear the air and talk about some of the recent big stories in the news. I am not a professional trader or stock analyst, I am an MBA student who is extremely interested in researching and learning more about investing and the stock market and I want to share all the news and knowledge that I can with you.

The big story with Game Stop first started evolving even before late January, 2021 when the stock prices went crazy. It started when hedge funds, investment companies, decided they want to short sell the Game Stop stocks. A short sale is an investment or trading strategy that speculates on the decline in a stock price. This particular short sale happened when institutional investors (hedge funds) thought that Game Stop’s stock was over-valued and that the price was going to drop in the future. They then borrowed Game Stop stocks from brokers and sold them back into the market at what they believed was an over-valued price, intending to buy it back for cheap in the future.

This is when the Reddit group called wallstreetbets noticed that there were more shorted stocks for Game Stop than actual shares of it in existence. This wallstreetbets community spread the word on the shorted Game Stop stocks and encouraged normal retail investors to buy up all of the available Game Stop stocks, which forces the price higher, knowing that the hedge funds MUST pay back the brokers that initially lent them the stocks. This drove up the stock price from around $20 per share up to $300-$400 per share.

During the height of the stock price some trading apps like Robinhood disabled the ability for users to buy Game Stop stocks but they did allow users to sell shares, which helped drive down the stock price. There is a lot of debate about the reasoning and ethics behind halting trading for Game Stop, so much so that there will be a Congressional hearing with the CEO of Robinhood, CEOs of two of the hedge funds involved, the co-founder of Reddit, and the trader who initially spread the story. I will update you all after the hearing.

In the end, the price of Game Stop stock dropped significantly compared to its height of $400, and today is valued around $40, but it keeps dropping everyday. The story of Game Stop has helped expose some of the inefficiencies in the stock market and shed light on some questionable practices.