Despite the market downturn GameStop
Despite the market downturn, meme stocks are surging: GameStop trading is halted, while AMC is up.
Despite the larger market selloff, shares in two meme stocks rocketed higher on Thursday, driven by retail investors. GameStop’s stock was suspended multiple times for volatility after rising more than 30% earlier in the day, while AMC Entertainment also rose.
Despite the recent market selloff, which sent the S&P 500 into bear market territory on Thursday, meme stocks defied the trend and soared higher owing to retail investor purchases.
GameStop’s stock was paused as many as four times in unusual trading on Thursday morning, soaring as high as 33 percent at one point before pulling down gains.
AMC Entertainment’s stock likewise soared, reaching a high of 29% earlier in the morning before plunging to a low of 12%.
Both companies, which are popular with retail investors, were still considerably higher on Thursday, with GameStop up almost 10% to $89 per share and AMC up over 5% to about $11 per share.
The two businesses, however, are highly shorted, with multiple hedge funds and short-sellers betting against their stocks: according to FactSet, GameStop has a short interest of 21.4 percent and AMC has a short interest of 19.5 percent.
Large short holdings against a firm can lead to extreme price movements, as regular investors pushing up the stock can cause a “short squeeze,” causing hedge funds to close their short positions and putting further purchasing pressure on the stock.
SURPRISING FACT: Meme stocks have suffered this year, falling victim to the larger selloff that has roiled markets, despite climbing higher on Thursday. In 2022, GameStop stock is down around 45 percent, while AMC stock is down more than 60 percent.
KEY BACKGROUND: In early 2021, GameStop and AMC were at the core of the “meme stock frenzy,” in which retail investors utilised internet forums like Reddit’s “Wall Street Bets” to coordinate trades, creating large losses for hedge funds and other short-sellers betting against them. In January 2021, GameStop stock touched a high of $483 per share, while AMC stock peaked at roughly $60 in June 2021.
WHAT TO WATCH FOR: In recent months, GameStop’s stock has risen as investors praised the company’s aspirations to enter the non-fungible token (NFT) space: In March, GameStop said that it will launch an NFT Marketplace by the end of July. Later that month, the business stated that it would seek shareholder approval for a stock split, making it simpler for regular investors to purchase shares. While stock splits do not impact a company’s inherent worth, they can generate publicity and frequently result in a short-term increase in share price.