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Led by stocks of Texas-based gaming retailer GameStop Corporation (NYSE:GME, GME:US), a number of meme stocks recorded a rapid surge once again on Thursday, February 25.
The force behind their rally, just like the last time, was a commune of retail investors who meet and discuss trading on their Reddit thread called WallStreetBets.
These heavily shorted stocks, namely AMC Entertainment, Koss Corporation, Nokia Corporation, etc. had hit the trending lists with a frenzied rally late in January 2021, primarily after a chatroom war broke out between day traders and short sellers. Soon enough, the virtual feud blew up into a David vs Goliath sort of instance as the bullish investors took on Wall Street analysts and began boosting shorted stocks that they took bearish stances for.
After skyrocketing to dizzying heights and stoking much discussions around the world about their rally, most of these meme stocks deflated to normal levels early on in February.
But just as reports began to murmur about day traders having left their favorite stocks for the dead, their names soared to the top the trending charts.
©Kalkine Group 2021
How Are The Meme Stocks Doing?
In the early days of the meme stock rally, activist short seller Andrew Left had slammed GameStop’s price rise saying that the brick-and-mortar retail chain’s stock was headed for the dumps. Soon, the gaming stock tumbled into the center of all the market mayhem that followed over the next few days. Its price rose to never-seen-before levels and triggered a substantial short squeeze.
While the overall stance was that the Reddit-based day traders were behind GameStop’s rise to fame, some analysts believe that some amount of “institutional involvement” also played a role in it.
After disappearing from the trend charts earlier in February, GameStop made a comeback on Wednesday with a 104 per cent gain. On Thursday, the stock climbed by nearly 19 per cent.
Another shorted stock that was caught up in the retail frenzy was movie theater chain AMC Entertainment. As the Reddit-boosted rally came back for a second act on Wednesday AMC stocks rose by 18 per cent. On Thursday, however, the stock dwindled by nearly nine per cent.
Reddit favorite Koss Corporation saw its stocks leap by 55 per cent on Wednesday, following by a nearly 17 per cent jump the following day.
Some reports pointed that a factor that could have played a role in fueling renewed interest in meme stocks was a Depository Trust & Clearing Corporation (DTCC) proposal on reducing the time it takes to settle a trade for US equities.
DTCC, a post-trade financial firm that that reportedly urged Robinhood to curb trading in volatile stocks, recommended that the settlement cycle be cut down from two days to one.
