GameStop, AMC Leisure Shares Soar as Meme Inventory Rally Returns

The meme stocks are back.

Stocks of companies that upset the stock market and social media earlier this year are bouncing again this week, rewarding individual investors who have held on for months.

GameStop Corp.

GME 14.88%

,

AMC Entertainment Holdings Inc.,

AMC 19.25%

and

express Inc.

have all risen more than 36% for weeks, bringing every stock to levels not seen in weeks – or in some cases months -.

The sudden increase is reminiscent of the end of January, when individual investors join forces To drive stocks of companies once believed dead by Wall Street to unprecedented heights. This week’s rally – though tamer by comparison – has lit up Reddit forums, Discord chat rooms, and the like

Twitter

Feeds.

Much like previous rallies among meme stocks this yearNo unique or clear catalyst appeared to be driving this week’s rally. Analysts said the jump was likely due to a number of factors that have caused individual traders to pile up. With cryptocurrencies having lost much of their steam this monthMany unprofessional traders have come back on the stock market in search of profit. Platforms like Reddit’s WallStreetBets forum have kept the buzz, especially with meme stocks.

“We’ve seen things get out of hand for the last month or so, but it’s starting to pick up again,” said Viraj Patel, global macro strategist at Vanda Research.

Data from VandaTrack shows that individual investors invested more than $ 22 million in AMC on Tuesday, more than double the average daily net inflow of around $ 9 million into the stock of around $ 9 million in 2021. The company’s share price traded above $ 19 on Wednesday afternoon, causing it to potentially close above the highs reached during the January meme stock rush.

Part of the excitement is the belief of individual investors that meme stocks like AMC and GameStop can rise “to the moon” again. Many have spent months monitoring bearish positions in the stocks in hopes of repeating the frantic surge in stocks earlier this year. At its peak earlier this year, GameStop shares rose to $ 483 for the day from less than $ 20 at the start of the year. It was trading at $ 240 on Wednesday afternoon, up 15% for the day.

The January rally was caused in part by brief pressure. Investors bet against a company by borrowing and selling stocks and betting that they can later buy them back at a lower price. Brief pressure occurs when the price rises instead, forcing those with short positions to buy stocks to limit their losses, resulting in further price gains.

Prior to the January rally in meme stocks, hedge funds and other institutional investors were betting that stock prices for companies like GameStop would continue to fall. Instead, they were punished with heavy losses when meme stocks began to rise.

Individual investors on social media hope to find institutional investors back on the wrong side of the trade. According to S3 Partners, short interest in AMC is currently close to 21% of the stock’s free float, down from a 2021 low of nearly 11% in March, but up from the 28% hit earlier this year. GameStop’s short interest is around 20% compared to more than 140% in January.

The recent rise in stocks suggests that another short squeeze could be possible, especially if short sellers lose conviction or if their losses increase, said Ihor Dusaniwsky, head of predictive analytics at S3 Partners. As early as this week, investors who had bet that GameStop and AMC shares would fall would have seen bigger losses than normal, he said. Those short in GameStop lost at least $ 692 million on Tuesday and Wednesday, data from S3 Partners shows. Short sellers betting against AMC lost at least $ 482 million over the same period.

“Both stocks currently have very high short squeeze potential,” said Dusaniwsky.

However, some analysts doubt that social media momentum can boost stocks as much as it did earlier this year. Inflows into meme stocks like AMC also remain a fraction of what was previously seen.

“The crowd will be disappointed with the potential returns. Mania takes a lot of momentum, ”said Peter Atwater, associate professor of economics at the College of William & Mary. “You may try, but I would be surprised if you could create the kind of organic crowd behavior that you had before.”

Another force behind GameStop’s rise could also be speculation about the video game retailer’s foray into another area of ​​booming online speculation –the market for digital collectibles known as non-fungible tokensor NFTs. A subdomain for “GameStop NFT“Posted recently on the company’s website and sparked speculation that GameStop may have its own suite of digital assets that users can buy and sell. GameStop did not immediately return requests for comments.

So-called NFTs have become increasingly popular this year, especially for owning digital collectibles such as works of art, music and sporting highlights. These tokens accompany digital assets and live on the blockchain, a digital ledger that records who they belong to, who created them, and other vital information.

NFTs have become popular in video gaming as a way of allowing players to have buildings, avatars, or game accessories, rather than essentially leasing them from a platform. Players hope that the items they purchase can be used on many gaming platforms, rather than just one.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Caitlin Ostroff caitlin.ostroff@wsj.com

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