- Video game retailer GameStop’s stock prices soared this week
- The surge is linked to a famous online trader rejoining social media
- “Meme stocks” get value from internet popularity, not company profits
- Will the frenzy around GameStop’s meme stock continue?
Social Media Star Trader Returns
Remember back in 2020 when GameStop’s stock prices skyrocketed due to online hype? The trader who kicked off that meme stock craze, Keith Gill or “Roaring Kitty” online, just returned on social media platforms like Reddit and YouTube. His return has reignited interest in GameStop among smaller investors.
What is a “Meme Stock”?
A meme stock is a company’s shares that become popular and valuable online, but not necessarily because the business is doing well financially. The stock price rises based on internet hype and jokes rather than the company’s profits or future outlook. GameStop has struggled as a brick-and-mortar video game store in recent years.
Why GameStop?
Ed Moyer, an independent stock analyst, explained that traders likely targeted GameStop again because:
- US stocks are near record-high prices overall
- Retail investors have renewed interest in speculative trading
- GameStop has a relatively high 24% “short interest” (shares shorted for future buying)
- Traders anticipate changes soon in trading settlement rules
So, while GameStop’s core business isn’t very profitable, the stock became an appealing target for the meme-stock rallying crowd looking to make money from internet-driven share price swings.
Will the Meme Stock Mania Last?
Moyer says this GameStop trading frenzy won’t be as big or long-lasting as the 2020 episode. He cited factors like higher borrowing costs and consumer belt-tightening due to inflation as reasons why excess cash for speculative meme stock trades may be limited this time.
Still, the hype around “meme stocks” continues to make waves through social media channels and impact accurate stock prices. Whether you’re an individual investor or an internet observer, the GameStop meme stock saga is one to watch unfold.
What do you think – is the meme stock phenomenon here to stay? Or is it just a fleeting internet craze?
