“Meme stock mania” refers to the unprecedented speculative trading surge in certain companies by retail investors who are primarily organized on platforms like Reddit, particularly in the subreddit r/WallStreetBets. These companies, often referred to as “meme stocks,” include GameStop (GME), AMC Entertainment (AMC), and others.
The mania first started in late January 2021 when some retail investors on Reddit started buying up shares and options of companies such as GameStop and AMC. Their primary aim was to trigger a “short squeeze” against Wall Street hedge funds that had bet against (shorted) these struggling companies. This strategy led to massive price swings in these stocks, temporarily driving up their share prices and causing significant losses for some hedge funds.
In June 2021, these stocks began to experience another surge in popularity, which is why people are talking about them again. The reasons for this resurgence vary. Some believe it’s driven by the same anti-establishment sentiment as before while others suggest it’s due to new developments in the companies themselves, or simply speculative trading.
Through investing in these traditionally shorted or undervalued stocks, retail investors have been able to not only drive up the price but also bring attention to the practices of hedge funds that were shorting the stocks. As a result of the ensuing controversy, entities like the Securities and Exchange Commission (SEC) have stated they will look into the situation.
However, investors should be aware that investing in these
