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Meme stocks are roaring again. Yes, again

News

Meme stocks are roaring again. Yes, again
News

News

Meme stocks are roaring again. Yes, again

2024-06-04 04:29 Last Updated At:04:32

NEW YORK (AP) — Meme stocks are shaking Wall Street once again Monday. And, as is so usually the case, it all started online.

A post on Reddit late Sunday indicated that Keith Gill, a central character in the original 2021 meme stock crack, had built a sizeable stake in GameStop. Shares of GameStop closed up 21% to $28 after jumping above $40 right after the opening of trading. AMC Entertainment, another popular meme stocks, rose 11.1%.

If it all sounds familiar, it should. It was just three weeks ago that GameStop shares were soaring on excitement about a post on social media by another account tied to Gill. At that time, a Twitter account associated with him made its first posting since June 2021, though the gains fizzled relatively quickly.

Ever since bands of smaller-pocketed and novice investors began taking stock prices of downtrodden companies to breathtaking heights three years ago, the potential for more flareups has been obvious.

This time, Wall Street is better prepared to more easily digest the sharp movements, experts say. But some things remain firmly the same. Chief among them is the risk associated with such volatile stocks, where prices can soar — and crater — quickly. Here’s a look at what’s going on:

Gill has become a hero online, known for continually professing how much he liked GameStop's stock as it charged to heights in 2021 that professional investors saw as irrational. He even said it in testimony before Congress when it was looking into the meme-stock craze.

Late Sunday, an account on Reddit with the handle Deep F- - - - - - Value shared a screenshot showing an account holding 5 million shares of GameStop stock, plus options to buy more. The total holdings were worth $181.4 million, as of Friday's close, and the screenshot looked just like ones that the account had shared during the supernova run for GameStop in early 2021.

It was the first post for the Reddit account since April 2021, when it had posted what it called a “final update” on its "YOLO", or you-only-live-once, investment in GameStop. Euphoria erupted quickly, with users on Reddit exclaiming “I'M HERE FOR HISTORY!” and “If he's still in, I'm still in.”

When the stock market opened for trading on Monday, GameStop immediately soared.

Financial analysts and professional investors who care mostly about numbers like profits, cash flow and interest rates would say no. GameStop’s financial prospects did not change over the weekend, before the dizzying swings in its stock price.

Conventional wisdom says a stock should eventually settle at a price that reflects how much cash the company is generating, where interest rates are heading and other factors. But in the short term, what sets a stock’s price is how much investors are willing to pay for it. And, on Monday at least, people are willing to pay much higher prices for shares of GameStop.

This is the new age of investing, one where anyone can buy a stock with zero commissions simply by tapping a few times on a phone. It's the culmination of years of innovation. At each step of the way, consumer advocates hailed the broadening playing field, which allowed more people to invest in stocks and build wealth. But they also warned that easy access could encourage people to trade too quickly or too rashly.

Meme-stock companies have more shares trading in the market than they did in 2021, which could lessen the chances of what's called a “short squeeze,” according to Nick Battista, director of market intelligence at tastylive, a streaming network geared toward options traders.

A short squeeze is a relatively rare event that can yield eye-popping profits for people riding the wave. When investors bet a stock's price will go down in the future, they “short” it by borrowing shares and selling them. Later, if the price does indeed fall, the short sellers can buy the stock, return the borrowed shares and pocket the difference.

But when a highly shorted stock rises in price quickly, short sellers sometimes scramble to get out of their trades. They can do that only by buying shares of the stock, which can set off a self-feeding cycle that makes the price shoot even higher.

Such a short squeeze likely contributed to GameStop's thrilling ascent in 2021, but the SEC"s staff said it was a small fraction of the overall purchases and that GameStop's stock stayed high even after short sellers had gotten out of their trades.

GameStop in March had roughly 305.9 million shares of its stock trading in the market, more than four times the number of shares it had in March 2021. Such growth “greatly increases the amount of activity needed to squeeze higher" for GameStop and other meme stocks, Battista said. “Can they move higher? Sure, but it’s going to be a tougher task this time around.”

It's important to know the momentum can shift just as suddenly the other way. It took just four weeks in 2021 for GameStop's stock to go from less than $5 to more than $120. But it has yet to touch that price again. Even after its big jump in recent days, GameStop shares can still be bought for less than $30.

After briefly reaching $390 during the summer of 2021, AMC's stock is now at roughly $5.

FILE - A GameStop store in New York is shown on Jan. 28, 2021. What’s going on with GameStop’s stock doesn’t make sense to a lot of people. The struggling video game retailer’s stock has been making stupefying moves this month, wild enough to raise concerns from Wall Street to the White House. (AP Photo/John Minchillo, File)

FILE - A GameStop store in New York is shown on Jan. 28, 2021. What’s going on with GameStop’s stock doesn’t make sense to a lot of people. The struggling video game retailer’s stock has been making stupefying moves this month, wild enough to raise concerns from Wall Street to the White House. (AP Photo/John Minchillo, File)

FILE - An AMC movie cinema is shown before opening Friday, Jan. 29, 2021, in Garland, Texas. (AP Photo/LM Otero, File)

FILE - An AMC movie cinema is shown before opening Friday, Jan. 29, 2021, in Garland, Texas. (AP Photo/LM Otero, File)

Next Article

Demolition of the Parkland classroom building where 17 died in 2018 shooting begins

2024-06-14 22:19 Last Updated At:22:21

PARKLAND, Fla. (AP) — A large excavator stretched to the top floor of the three-story classroom building where 17 people died in the 2018 mass shooting at Parkland's Marjory Stoneman Douglas High School, making a loud wrenching sound as it punched out a window early Friday as the long-awaited demolition project got underway.

Several victims' family members stood about 100 yards (91 meters) away in the school’s parking lot holding their cellphones to take photos and video of the event.

Nearby, Dylan Persaud, who was a student in 2018, watched as the destruction began.

Persaud had been standing near the freshman building when the shooting started that day. He lost seven long-time friends and his geography teacher, Scott Beigel, in the shooting.

“I’d like to see it gone,“ he said. “It puts a period on the end of the story. They should put a nice memorial there for the 17."

The victims' families were invited to watch the first blows and hammer off a piece themselves if they choose. Officials plan to complete the weekslong project before the school’s 3,300 students return in August from summer vacation. Most were in elementary school when the shooting happened.

The building had been kept up to serve as evidence at the shooter's 2022 penalty trial. Jurors toured its bullet-pocked and blood-stained halls, but spared him a death sentence. He is serving a term of life without parole.

Broward County is not alone in taking down a school building after a mass shooting. In Connecticut, Sandy Hook Elementary School was torn down after the 2012 shooting and replaced. In Texas, officials closed Robb Elementary in Uvalde after the 2022 shooting there and plan to demolish it. Colorado’s Columbine High had its library demolished after the 1999 shooting.

Over the last year, some victims' relatives have led Vice President Kamala Harris, members of Congress, school officials, police officers and about 500 other invitees from around the country on tours of the building. They mostly demonstrated how improved safety measures like bullet-resistant glass in door windows, a better alarm system and doors that lock from the inside could have saved lives.

Those who have taken the tour have called it gut-wrenching as something of a time capsule of Feb. 14, 2018. Textbooks and laptops sat open on desks, and wilted Valentine’s Day flowers, deflated balloons and abandoned teddy bears were scattered amid broken glass. Those objects have now been removed.

U.S. Rep. Jared Moskowitz, an alumnus of the school, said in a statement Friday that the community was forever changed by the shooting.

“I never thought I’d see the high school where I graduated from turned into a war zone. What I’ve seen in that building is truly haunting — windows with bullet holes, homework scattered everywhere, blood in the hallway,” Moskowitz said. “The people of Parkland will no longer have to pass by this horrific reminder of our grief. The families of those innocent lives taken that day will never be able to move on, just move forward.”

The Broward County school board has not decided what the building will be replaced with. Teachers suggested a practice field for the band, Junior ROTC and other groups, connected by a landscaped pathway to a nearby memorial that was erected a few years ago. Several of the students killed belonged to the band or Junior ROTC.

Some parents want the site turned into a memorial.

Tony Montalto, whose daughter Gina died that day, said in a statement that the demolition is “a necessary part of moving forward.” He has advocated for school safety programs and a memorial site.

“While we can never erase the pain and the memories, we can create a space that honors their legacy and fosters hope for a safer future,” he said. “That’s why we fight every day to pass meaningful legislation that keeps our family members safe in their school.”

FILE - A security agent walks alongside a barrier surrounding Marjory Stoneman Douglas High School, July 5, 2023, in Parkland, Fla. Demolition of the building where 17 people died in the 2018 Parkland school shooting is set to begin, as crews will begin tearing down the three-story building at the high school on Thursday, June 13, 2024. (AP Photo/Rebecca Blackwell, File)

FILE - A security agent walks alongside a barrier surrounding Marjory Stoneman Douglas High School, July 5, 2023, in Parkland, Fla. Demolition of the building where 17 people died in the 2018 Parkland school shooting is set to begin, as crews will begin tearing down the three-story building at the high school on Thursday, June 13, 2024. (AP Photo/Rebecca Blackwell, File)

FILE - The 1200 building at Marjory Stoneman Douglas High School in Parkland, Fla., is seen, Oct. 20, 2021. Demolition of the building where 17 people died in the 2018 Parkland school shooting is set to begin, as crews will begin tearing down the three-story building at the high school on Thursday, June 13, 2024. (Carline Jean/South Florida Sun-Sentinel via AP, File)

FILE - The 1200 building at Marjory Stoneman Douglas High School in Parkland, Fla., is seen, Oct. 20, 2021. Demolition of the building where 17 people died in the 2018 Parkland school shooting is set to begin, as crews will begin tearing down the three-story building at the high school on Thursday, June 13, 2024. (Carline Jean/South Florida Sun-Sentinel via AP, File)

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