Meme Stock Craze Returns: These Struggling Companies Are Soaring Thanks To Retail Traders
LONDON,ENGLAND - June 2023: Krispy Kreme Doughnuts store sign External Store Sign London, England. ... More (Photo by) Getty Images
'Meme stocks,' a term popularized during the Gamestop (GME) stock frenzy of 2021, are companies that attract a cult-like following that can lead to volatile swings in stocks as retail traders swiftly move to invest.
More than 140 million Krispy Kreme shares had been traded as of just after 2 p.m. EDT on Wednesday—outpacing its normal volume by 26 times—after it shot up 27% on Tuesday.
GoPro had 54 times its normal trading volume Wednesday afternoon, a day after the stock soared 41%.
Kohl's, which rose 38% on Tuesday, placed third as the most trending ticker on Stockwits that same day, a social media platform focusing on retail investors.
Krispy Kreme was up 4.1%, GoPro 8.4% and Kohl's down 15.1% on the day as of Wednesday afternoon.
GoPro's recent surge has turned the stock around to put it up 40% on the year, while Krispy Kreme and Kohl's are still down year to date, despite indexes rising to all-time highs.
Meme stocks are often struggling companies that gain viral popularity across social media, as many users share nostalgic memories of the brands, with the viral trends translating into often unprecedented stock price rises—and subsequent falls as investors cash in. Reddit, and more specifically the r/wallstreetbets subreddit, has historically been the focal point for buzz around meme stocks, but discourse also takes place on X and Facebook. The latest craze started in early July with the stock of Opendoor Technologies, an online real-estate, increasing 600% thanks to social media attention. Crucial Quote
Danial Burnside, a financial analyst and professor at the University of Rochester, told Forbes that 'with companies like Kohl's, GoPro, Rocket — you're not investing in fundamentals, you're betting on crowd psychology and social media dynamics,' adding 'Researchers don't have good models for this.. you can't rely on any good economics to guide you here.' If someone decides to invest in a meme stock, Burnside encourages potential investors to 'keep it small.' 'No more than, say, 5% of your portfolio,' he added. 'It's speculation, not strategy. If you can't afford to lose it, you can't afford to meme it.'
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