May 28, 2024

Meme stocks are back — and it’s not just GameStop and AMC. Others like Blackberry, Virgin Galactic and Koss are also flying high. 

The reappearance on social media of Keith Patrick Gill, the investor known as “Roaring Kitty,” raises the question of how far the rally will go and whether markets will see a repeat of what happened a few years ago.

Roaring Kitty is the guy who was primarily behind the GameStop saga in 2021. On Sunday, he posted a picture on X showing a gamer leaning forward in the chair, indicating intense focus — and prompting speculation among followers that he’ll return to Reddit. The tweet had been viewed by more than 24 million people as of Tuesday morning.

Comparing the current meme stock rally with what happened in 2021 is tempting. But in an email interview, Dan Egan, the head of behavioral finance at investment advisor Betterment, said he believes the current meme stock 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.”

Still, he said that some will have an appetite for this kind of investment.

“Perhaps fewer people are actively looking to buy a house due to high interest rates, which means their savings aren’t earmarked for a near-term purchase,” Egan said. “This lends itself more towards an ‘it’s OK to take risks, I don’t need this money’ mindset.”

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.

Itay Goldstein, a professor of economics and finance at the Wharton School, echoed the sentiment.

“The underlying force is that of coordination: Speculators coordinate around some message or story and all trade the stock in the same direction, causing its price to surge,” he said in an email. “This is assisted by technologies that enable them to communicate on public forums and by the underlying conditions of firms which could benefit from such coordination.”

He said meme stocks come and go — and that trend is unlikely to persist.

Egan also added that these types of volatile price swings do not benefit companies and investors.

“It makes shareholders more transient and short-termist, harder to negotiate with,” he added. “It can tank acquisition plans and talks and make it very hard to retain senior people.”

More on GameStop, AMC, and the meme stocks rally

GameStop short-sellers have lost more than $2 billion as the meme stock rally continues

‘Roaring Kitty’ brought back the GameStop meme stock frenzy. Here’s what to know about him

GameStop stock soars 120% as the ‘Roaring Kitty’ meme stock rally continues for a second day

It’s not just GameStop and AMC. These meme stocks are also rallying

GameStop meme stock mania is back. Here’s what happened last time

The GameStop meme stock rally helped AMC stock surge 102% — and the company raised $250 million

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