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Meme stocks enjoyed a return to the limelight this week after Roaring Kitty, the investor behind the GameStop saga in 2021, made a comeback on social media and sparked a renewed frenzy.
Now it appears the meme stock party has ended.
On Wednesday morning, shares of video retailer GameStop and AMC were down by over 30% and 25%, respectively.
Just a day earlier, GameStop was up a whopping 120% in pre-market trading. Shares were up 82% after markets opened Tuesday and ended the day up 60% at $48.75. As per data firm S3 Partners, the meme stock rally cost GameStop stock short-sellers more than $2 billion in just two days.
Movie theater chain AMC Entertainment, meanwhile, raised approximately $250 million in new equity capital on Monday by selling 72.5 million shares at an average price of $3.45. AMC stock surged another 130% in pre-market trading on Tuesday. It was still up 102% after markets opened and closed at $6.85, up 32%.
Other meme stocks that rallied a day earlier followed the downward trend on Wednesday morning. Blackberry, the maker of the darling smartphone of the 2000s, was down over 10% Wednesday morning. The stock had jumped 14% on Tuesday.
Virgin Galactic, a pioneer in space tourism and travel, soared more than 33% Tuesday morning but had dropped over 15% Wednesday morning. And headphone manufacturer Koss, which was one of the major meme stocks of 2021, rallied 35% on Tuesday but was down 26% Wednesday morning.
Experts had previously said they didn’t believe this year’s meme stock rally would last like the 2021 one did. In an email interview, Dan Egan, the head of behavioral finance at investment advisor Betterment, said he believes the current rally is a more time-compressed phenomenon. In 2021, interest rates were low, and people were stuck at home during the pandemic with extra cash from stimulus checks. None of those things are happening in 2024, he said.
“There might be a large body of meme stockholders who bought during the last rally looking to get out,” Egan said.
“People with a losing stock will be motivated to sell as soon as they’re back to even,” he added, “which will put some downward pressure on the price as it hits higher price points.”
Egan said that while there is a core group of people who are interested in this kind of investment, it will be less widespread and, therefore, will be over more quickly than last time.