What Is A Meme Stock? - Part 1
And why does it matter?
Whether you pronounce it “meem” or, heaven forbid, “me-me,” the rise of meme stocks is definitely something to pay attention to. They are simply stocks that have gained popularity online and, in a word, have “gone viral.”
The GameStop fiasco back in January 2021 sparked awareness and brought into reality the impact of “meme stocks” on the market.
Instead of being driven by the fundamental values of the company represented by the stock, these stocks are driven by speculation and brew on social media platforms such as Reddit. Essentially, what is happening is a group of amateur investors will get together (more than likely the same group who DIY their way through investing on apps such as Robinhood or Acorns) and coordinate a short-squeeze. These targeted short-squeezes aren’t illegal, but they can throw a loop in the market for professional investors and investors with long-term goals.1
Meme stocks are appealing for those investors who play into the optimistic narratives that are built up in the hopes of gaining wealth quickly. We will discuss the ways that these “bubble wealth” investors can affect the market in a future blogpost.2
Ultimately, meme stocks won’t make much of a difference to most long-term investors; however, there’s nothing keeping Redditors or memers from attacking a stock that they found to be amusing or remotely funny...