Shares of two meme stocks rose on Thursday, buoyed by retail investors despite a general market sell-off, as GameStop shares were halted multiple times by volatility after rising more than 30% earlier in the day, while AMC Entertainment also rebounded.
Despite the ongoing market sell-off that brought the S&P 500 to the brink of bear market territory on Thursday, meme stocks bucked the trend and rose as retail investors bought stocks.
Shares of video game retailer GameStop stopped as many as four times in odd trading on Thursday morning, surging as much as 33% at one point before paring gains a bit.
Shares of theater chain AMC Entertainment also soared, jumping as much as 29% earlier in the morning before falling back to the ground.
Both stocks, which are favorites among retail investors, were still significantly higher on Thursday, with GameStop rising almost 10% to trade at $89 a share, while AMC gained more than 5%, trading at almost $11 a share.
However, the two companies are seriously short, with numerous hedge funds and short sellers betting against their shares: GameStop is short 21.4% and AMC 19.5%, according to FactSet.
Large short positions against a company can often lead to wild swings in the stock price, as retail investors driving shares higher can create a “short squeeze”, forcing hedge funds to close short positions and create more buying pressure.
Despite rallying higher on Thursday, meme stocks have struggled this year, falling victim to the sell-off that has rattled markets. GameStop stock is down about 45% in 2022, while AMC is down more than 60%.
GameStop and AMC were at the center of “meme stock mania” in early 2021, as retail investors used online forums like Reddit’s “Wall Street Bets,” coordinated trades to drive up stock prices, causing it often caused huge losses for hedge funds and other short-termers. vendors betting against you. GameStop shares rose as high as $483 per share in January 2021, while AMC peaked around $60 in June 2021.
What to watch for:
GameStop’s stock has gotten a boost in recent months as investors applauded the company’s plans to venture into the non-fungible token (NFT) space: GameStop announced in March that it plans to create an NFT Marketplace by the end of July. . Later that month, the company also announced that it will ask shareholders to approve a stock split, which would make it easier for retail investors to buy shares. While stock splits don’t change a company’s intrinsic value, they do generate buzz and often provide a short-term boost in stock price.
Meme stocks and cryptocurrencies surge again as experts warn of “dangerous” market conditions (Forbes)