Other meme stocks, including AMC (AMC), bed bath beyond (BBBY) and Beyond meat (BYND) also roared higher Thursday. AMC is up nearly 10%, a much larger gain than rival box office stocks Cinemamark (CNK) and IMAX (IMAX).
Bed Bath & Beyond is up about 2%. Beyond Meat plunged 20% at the opening bell after weak earnings results, but the plant-based giant reversed course and briefly traded higher. He ended the day down just 4%.
Most of these stocks, favorites of traders on Reddit and other social media platforms, pared their early gains throughout the day, and all have fallen this year along with the broader market as a whole. GameStop is still down about 40% in 2022 despite Thursday’s bang, while AMC is down nearly 60% over the same period.
AMC in particular has a fervent following, who frequently use hashtags on Twitter like #AMCNEVERLEAVING and #AMCtothemoon to promote the stock. But some investors have bet against AMC, concerned that the company has been taking too many risks lately.
The theater chain now plans to sell AMC-branded popcorn outside of theaters. It has also invested in cryptocurrencies and even invested in a precious metals mine.
One Possible Reason AMC, GameStop, and Other Meme Stocks Are Soaring? You may be taken by a so-called short squeeze.
Many short sellers — investors who borrow stocks and sell them in hopes of buying them back at a lower price — bet heavily against these meme stocks.
However, it is a very risky strategy. If a short stock rises from the price the short seller bought, the investor can lose a lot of money.
When heavily shorted stocks rise, short sellers may be forced to quickly cover their positions by buying back shares to avoid even bigger losses. This short-covering can feed itself, resulting in a “squeeze” that drives the stock price higher and higher.
Investors in AMC and other meme stocks even have an acronym to describe this phenomenon: MOASS, which stands for Mother of All Short Squeezes.
Some would argue that short squeezes aren’t a good reason for a stock to rise because they have little to do with a company’s fundamentals like sales and earnings.
However, others note that individual investors should be able to defend themselves against larger institutional firms and hedge funds that may unfairly target and short a stock.
“Fair markets are free markets,” said Ryan Cohen Tough (EVERYTHING)
Co-founder who is now Chairman of GameStop and major shareholder, tweeted
on Thursday. Cohen’s RC Ventures also has a large interest in Bed Bath & Beyond.