Business Essentials for Professionals


Why Is The Stock Of GME Rising? An Explanation Of The Meme Stock Rise

Why Is The Stock Of GME Rising? An Explanation Of The Meme Stock Rise
Retail investors' attention has once again been drawn to GameStop and AMC Entertainment, evoking memories of "the meme stock frenzy" that engulfed Wall Street three years prior, as a result of social media posts made by "Roaring Kitty," the main figure behind that surge.
What you should know about the current spike in meme stocks is as follows:
Roaring Kitty and His Sketch 
Following a three-year hiatus, Keith Gill, also known as "Roaring Kitty" among traders, posted a number of mysterious messages on social networking site X in May. A drawing of a man leaning forward in a chair was one of them; this meme is common among gamers and signifies that things are becoming serious.
The online stock influencer had earlier this week shared an image of a $116 million wager on GameStop's stock. On Thursday, he said that he would be hosting a livestream on Friday at 12 p.m. ET (1600 GMT).
Through vibrant Reddit postings and YouTube streams, Gill presented a strong case for GameStop in 2021, which helped the business draw in a large inflow of retail funding.
Gill refuted claims that he promoted GameStop to unsuspecting investors on social media in order to make money in his 2021 testimony before Congress.
Gamestop Retakes the Lead, But It's Still Tight
As of the most recent close, video game retailer GameStop has increased by more than 160% this year. AMC Entertainment, a theatre company, saw gains along with other so-called meme stocks during their first rise, but it has since lost those gains and is down over 6% for the year.
According to Vanda Research, retail traders made up 11% of the turnover in the videogame retailer between Monday and Tuesday. On Friday, they were the most popular stock on the social media network Stocktwits for retail trading.
The second-largest cryptocurrency in the world, Ether, was expected to rise for the first time in over two years on Tuesday due to optimism.
Prior to the webcast, the firm posted its quarterly results ahead of schedule and revealed plans to sell up to 75 million shares in order to raise more than $3 billion. As a result, early trading on the stock was erratic.
Along with GameStop, several heavily shorted companies have lost ground. SunPower, a solar company, and Tupperware, a manufacturer of storage containers, have both dropped 20% and 10% so far this year.
How Do Meme Stocks Work?
Meme stocks are specific business shares that have experienced a surge in value due to the use of social media investing advice and trading platforms by regular investors.
It came to light in 2021 as a result of the COVID-19 lockdowns, governmental stimulus, and exceptionally low interest rates, which encouraged investors to purchase shares.
Anyone with a smartphone was also encouraged to experiment with stocks by the development of zero-fee trading applications.
As a group, thousands of Reddit users on discount trading sites like Robinhood conspired to force the prices of "meme" stocks higher, putting pressure on hedge funds that had bet against or taken short positions in those shares.
What's New About This Time?
The Federal Reserve's vigorous attempts to control inflation have resulted in multi-decade highs in U.S. interest rates, and the gains of the S&P 500 are concentrated in the shares of a small number of megacap businesses.
A lot of fund managers are also anticipating more remarks from "Roaring Kitty".
The well-liked pandemic-era strategy was dealt a fatal blow when Roundhill Investments said this year that it was closing its exchange-traded fund that tracked the performance of meme stocks, almost two years after it launched.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc