Meme Stocks: Meaning, Examples, & Investing Risks

Though the idea of amassing crazy wealth overnight is obviously appealing, the reality is that the odds are heavily stacked against anyone trying to outsmart the market. The meme investors who walked away with a lot of money were arguably just very lucky. This kind of trading is ultimately not that much different than gambling. Commission-free trading refers to $0 commissions charged what is market maker on trades of US listed registered securities placed during the US Markets Regular Trading Hours in self-directed brokerage accounts offered by Public Investing. Keep in mind that other fees such as regulatory fees, Premium subscription fees, commissions on trades during extended trading hours, wire transfer fees, and paper statement fees may apply to your brokerage account.

Short Squeeze With Meme Stocks

For public companies, much of their value comes from market capitalization. Shares are worth what people are willing to pay for them (aka market value). Meme stocks are often hard to borrow, with a high short-interest ratio. The question of who owns CrowdStrike was part of a discredited conspiracy theory after the company investigated Russia’s role in the 2016 US elections. CrowdStrike is a US-based cybersecurity firm that helps companies manage their security in “IT environments” — that is, everything they use an internet connection to access. On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.

The rewards of meme stocks

Also, no research or knowledge of the stock market or the company you invest in is required. In some ways, getting wind of a meme stock is akin to hearing about it from a friend or relative, who may or may not have investing experience. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Risking money in speculative investments can be exhilarating, but it is rarely the path to long-term wealth. Investing in low-cost index funds and through tax-advantaged retirement accounts such as IRAs has a higher likelihood of success than relying on risky investing strategies.

Social sentiment: How meme stocks popularize

The good news is that meme stocks come from all nooks and crannies of the stock market, so it’s possible to build a diversified portfolio of holdings that can catch a tailwind from various places. While it can be tempting to get in on a meme stock craze, your money is safer invested in other ways like through index funds. Below, CNBC Select explains these types of investments, plus where you’re likely better off putting your money instead. There is no guarantee that any of these stocks, or other meme stocks to come, will generate returns. In 2022, Bed Bath & Beyond announced intentions to sell 12 million shares in a secondary offering as meme stock promoters pumped the value of its stock.

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2. Either way, meme stock investors embrace the turbulence and live for the double-digit swings in either direction.
3. We make every effort to provide accurate and up-to-date information.
4. One visible outcome of the meme stock saga has been an increase in interest in retail investing.

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Palantir has concentrated exposure working for government entities, but it’s quickly working to expand further into the private sector. SoFi’s financial services — all unified together via a singular app — got its start in the student loan niche of the industry. But since becoming a public company, the fintech stock favorite has gotten aggressive, expanding its reach and has added a few million new customers in recent years. As with other fast-moving businesses, SoFi’s biggest hurdle now is how quickly it can focus on breakeven. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.

Except in the case of GME, the hedge fund’s plans went wrong as so many retail investors started buying. Also on Jan. 26, Tesla CEO Elon Musk tweeted a link to the WallStreetBets subreddit where talk of GME was the main topic of conversation, with the caption, “Gamestonk!! ” Often in the case of recent meme stocks, the cycle has been fueled by praise and mentions from public figures. Because many meme stocks are based in the USA, you may be charged a foreign exchange fee. The company’s share price jumped 16% in May 2024 – likely in response to Keith Gill’s return to social media, and is now trading around $3.20. BlackBerry’s share price soared from $6.63 to $14 within the space of a month during January 2021’s meme stock frenzy, before steadily declining.

He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. Like a lot of modern technology companies, it hasn’t been around that long. It was founded a mere 13 years ago, but has grown to employ nearly 8,500 people. In Alaska, the 911 emergency service was affected, while Sky News was off air for several hours on Friday morning, unable to broadcast. Railway companies, including Britain’s biggest which runs Southern, Thameslink, Gatwick Express and Great Northern, warned passengers to expect delays.

A technical issue related to a US-based cybersecurity firm named CrowdStrike caused computers running Microsoft software across Australia and abroad to glitch on Friday. Moving beyond the buybacks, Chewy is a revenue grower, albeit not a spectacular one. Specifically, the company’s net sales increased 3.1% year over year to $2.88 billion in fiscal 2024’s https://www.1investing.in/ first quarter. Consequently, Chewy can reduce the supply of Chewy shares, which could make each share more valuable in the long run. Our content is packed with the essential knowledge that’s needed to help you to become a successful trader. On our site, you will find thousands of dollars worth of free online trading courses, tutorials, and reviews.

As the price of the shorted stock rises, the short seller will begin to experience losses. These losses must be covered in a timely fashion, often prompted via margin calls, whereby the broker demands funds to make up for those paper losses. Each day our team does live streaming where we focus on real-time group mentoring, coaching, and stock training.

Part of the challenge in explaining the price movements of meme stocks is that the change in share price can’t be explained by the fundamentals of the underlying businesses. GameStop’s sales fell about 11 percent in its 2023 fiscal year compared to 2022 and fell nearly 20 percent during its fourth quarter. The company earned just $6.7 million in net income in 2023, which is far from justifying its market value of over $9 billion. Less than two years later, after the initial meme stock craze had largely died down and in true meme stock fashion, Roundhill announced the closure of the Meme Stock ETF.