After staying quiet for months, meme stocks are back and they brought popcorn with them. Yesterday, AMC shot up by over 100% — along with other meme stocks like Gamestop (+15%), Blackberry (+37%).

Backstory: Memes and WSB

In Jan. 2020, AMC was part of the so-called “meme stocks” rising to moon-high levels — on the back of the WallStreetBets Reddit community.

• In the following months, these stocks bounced up and down, but at much lower levels from their Jan peaks.
• Now they’re back! With AMC at the center of attention instead of Gamestop.

On June 1, AMC sold $230m worth of stock to Mudrick Capital, which flipped the investment for a ~$40m gain the same day — saying AMC shares were overvalued.

Traditionally, stocks go down after a company sells more stock, which reduces the value of existing investors’ stock. But in this case, AMC’s stock shot up by over 100% in the next 2 days.

Playing the game

With retail investors owning a greater portion of a company’s shares, CEOs are getting cleverer in communicating with investors — by going straight to the source:

• AMC CEO, Adam Aron, follows in Elon’s footsteps — connecting with retail investors directly via Twitter, Youtube and other platforms.
• On June 2, AMC launched Investor Connect, its website portal for investors with offers, perks and — free popcorn.

Retail investors are in the driver seat with AMC — owning ~80% of AMC’s shares, opposite of the norm. Of the 10 largest US companies, institutions typically own 70-86% with retail investors owning the rest.

Investors: Fundamentals with that popcorn? No thank you.

Yes the company is losing boatloads of money and isn’t expected to see a profit for several years. But in the land of meme stocks, business fundamentals play no role.

• Here’s a tip: Don’t take them seriously. They’re called meme stocks for a reason.

How will this end? We’ve seen a similar pattern occur: Online communities drive up these stocks, retail investors pile in, early investors get out and those who come in late are left with large losses.

Even this time, it’s unlikely to be any different. Meme on, apes.