Meme stocks are back. Should you care?
Last month, a familiar frenzy erupted as share prices of Opendoor Technologies, Kohl's, GoPro, and Krispy Kreme skyrocketed – some by over 70 per cent in a single session.
But before you join the rush in hopes of catching the next GameStop, it's worth pausing and asking: If this all feels like 2021 again, why does it keep happening? And more importantly, does it ever end well?
When they first emerged, meme stocks were a cultural moment. Locked indoors during the pandemic, retail investors — many of them first-timers — turned to online forums like r/WallStreetBets to coordinate bets on downtrodden companies.
Many users based in the US were also flush with cash having just received stimulus payouts.
Fast forward to 2025, and meme stocks are ripping again.
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'I've been seeing signs of a 'flight to crap' recently,' Steve Sosnick, chief strategist at Interactive Brokers, told Bloomberg . 'The recent rally, which was largely powered in its initial phase by individual investors buying large-cap stocks and major indexes, has emboldened many to engage in more risky types of investing.'
🤡 What makes a meme stock?
Like the episode four years ago, amateur traders are piling into stocks with volatile swings in share prices that aren't based on the underlying business fundamentals.
Often, these stocks are cheap. They're typically also heavily shorted, meaning investors are betting that the price of the stock will fall in the future.
When investors short a stock, they borrow shares of a stock and sell it on the market:
You borrow a share of Company A's stock from your broker
You sell that share for $10, expecting its stock price to drop
Company A's stock price drops to S$5, and you buy back the stock for S$5
You return that share you bought back, and pocket the S$5 difference as profit
That only works if the stock price falls after you short it. If share prices go up, there's no limit to how much you can lose because you'll need to buy back the stock no matter the price to return it to your broker.
So the meme stock strategy (also known as a short squeeze) works like this:
Many people have borrowed shares of Company B to short it
You convince thousands of people to buy shares of Company B, which causes a spike in price
Investors who shorted Company B panic and buy back shares of Company B to return to their broker. This way, they cut their losses in case share prices go up further.
As these investors buy back their shares, that drives up stock prices even more
Often, meme stocks are brands that are recognisable to investors (think Krispy Kreme or GoPro).
That makes it easier to get people excited about jumping on a bandwagon than a relatively unknown stock, because the strategy works only if enough people join in on the action.
⚖️ Are meme stocks risky?
Trading meme stocks can be very risky because the reasoning behind buying them has almost nothing to do with the performance or prospects of the underlying business.
They're also highly volatile, swinging up to double-digit percentages within hours, which can lead investors to make bad emotional decisions.
While meme-stock spikes can lead to eye-watering gains for a lucky few, they often leave latecomers holding the bag.
For instance, GameStop stock has lost more than 70 per cent of its value from its peak in January 2021, while AMC has plunged nearly 99 per cent since its June 2021 high.
Those who bought near the peak in hopes of a community-fuelled rally saw their investments evaporate.
Because when high stock prices are not being supported by strong business fundamentals, the only thing keeping prices up is other investors hoping for a quick buck. And when the crowd disperses, the gains vanish.
The ones who almost always benefit from the mania are the company employees who get to sell their stock holdings at high prices or the company itself when it issues new shares .
It's tempting to think you can outsmart the crowd. But when a stock becomes a meme, the smart money has usually already moved on.
The best investors don't chase short-term trends. They build long-term portfolios based on strong companies, solid earnings, and sustainable growth. Meme stocks offer the illusion of easy money, but more often than not, they're a shortcut to disappointment.
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[SINGAPORE] Just when you thought the meme-stock mania had faded into financial history, it's back: louder, faster, and perhaps even more absurd. Last month, a familiar frenzy erupted as share prices of Opendoor Technologies, Kohl's, GoPro, and Krispy Kreme skyrocketed – some by over 70 per cent in a single session. But before you join the rush in hopes of catching the next GameStop, it's worth pausing and asking: If this all feels like 2021 again, why does it keep happening? And more importantly, does it ever end well? When they first emerged, meme stocks were a cultural moment. Locked indoors during the pandemic, retail investors — many of them first-timers — turned to online forums like r/WallStreetBets to coordinate bets on downtrodden companies. Many users based in the US were also flush with cash having just received stimulus payouts. Fast forward to 2025, and meme stocks are ripping again. A NEWSLETTER FOR YOU Friday, 3 pm Thrive Money, career and life hacks to help young adults stay ahead of the curve. Sign Up Sign Up 'I've been seeing signs of a 'flight to crap' recently,' Steve Sosnick, chief strategist at Interactive Brokers, told Bloomberg . 'The recent rally, which was largely powered in its initial phase by individual investors buying large-cap stocks and major indexes, has emboldened many to engage in more risky types of investing.' 🤡 What makes a meme stock? Like the episode four years ago, amateur traders are piling into stocks with volatile swings in share prices that aren't based on the underlying business fundamentals. Often, these stocks are cheap. They're typically also heavily shorted, meaning investors are betting that the price of the stock will fall in the future. When investors short a stock, they borrow shares of a stock and sell it on the market: You borrow a share of Company A's stock from your broker You sell that share for $10, expecting its stock price to drop Company A's stock price drops to S$5, and you buy back the stock for S$5 You return that share you bought back, and pocket the S$5 difference as profit That only works if the stock price falls after you short it. If share prices go up, there's no limit to how much you can lose because you'll need to buy back the stock no matter the price to return it to your broker. So the meme stock strategy (also known as a short squeeze) works like this: Many people have borrowed shares of Company B to short it You convince thousands of people to buy shares of Company B, which causes a spike in price Investors who shorted Company B panic and buy back shares of Company B to return to their broker. This way, they cut their losses in case share prices go up further. As these investors buy back their shares, that drives up stock prices even more Often, meme stocks are brands that are recognisable to investors (think Krispy Kreme or GoPro). That makes it easier to get people excited about jumping on a bandwagon than a relatively unknown stock, because the strategy works only if enough people join in on the action. ⚖️ Are meme stocks risky? Trading meme stocks can be very risky because the reasoning behind buying them has almost nothing to do with the performance or prospects of the underlying business. They're also highly volatile, swinging up to double-digit percentages within hours, which can lead investors to make bad emotional decisions. While meme-stock spikes can lead to eye-watering gains for a lucky few, they often leave latecomers holding the bag. For instance, GameStop stock has lost more than 70 per cent of its value from its peak in January 2021, while AMC has plunged nearly 99 per cent since its June 2021 high. Those who bought near the peak in hopes of a community-fuelled rally saw their investments evaporate. Because when high stock prices are not being supported by strong business fundamentals, the only thing keeping prices up is other investors hoping for a quick buck. And when the crowd disperses, the gains vanish. The ones who almost always benefit from the mania are the company employees who get to sell their stock holdings at high prices or the company itself when it issues new shares . It's tempting to think you can outsmart the crowd. But when a stock becomes a meme, the smart money has usually already moved on. The best investors don't chase short-term trends. They build long-term portfolios based on strong companies, solid earnings, and sustainable growth. Meme stocks offer the illusion of easy money, but more often than not, they're a shortcut to disappointment. TL;DR
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