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(Bloomberg) – Retail investors who have fueled a basket of memes stocks to sky-high heights are struck by a risky environment and waning enthusiasm for their favorite high-flying stocks.
The group of 37 so-called meme stocks tracked by Bloomberg fell 4.4% on Monday, marking a sixth straight decline, after its worst week since late February. The basket’s longest losing streak since the storming of Wall Street comes as the spread of the delta variant raises concerns about the future of global economic growth.
The recent massive sell-off marks the end of the latest chapter in the meme mania where amateur investors face the reality of investing in hype-related companies instead of fundamentals.
While investors who bought shares of AMC Entertainment Holdings Inc. and GameStop Corp. at the start of the year are sitting on huge gains, the same cannot be said of traders who crammed into hot stocks like Chamath Palihapitiya- backed Clover Health Investments Corp. and Hims & Hers Health Inc. With the latest ending, top performers and cult favorites like AMC Entertainment have gone from leaders to laggards within the group.
AMC Entertainment is down 27% and GameStop is down 11% in the past six days, while Express Inc., Zomedica Corp., The9 Ltd are each down more than 20%.
Shares of GameStop, often seen as a retail icon, took a hit last week after a Bloomberg News report that Netflix Inc. was planning to expand into the video game business. The video game retailer fell 5.7% over concerns that another direct-to-consumer offering could lead gamers to simply download digital copies instead of going to GameStop locations or buying from their website.
While some were quick to downplay the risk, Wedbush analyst Michael Pachter said the streaming video giant’s efforts should be “all mobile,” GameStop shares have been hit nonetheless and are trading near the lowest in the world. two months.
AMC Entertainment remains the best-performing stock in the group this year and has climbed 1,500%, nearly double the gains seen in GameStop. Despite this year’s massive rally, the stock has lost a fifth of its value over the past week and is less than half of its all-time high reached last month. AMC fell as much as 11% on Monday as the surge in Covid cases lowered reopening stocks.
Trading volume for AMC has dried up with 614 million shares changing hands last week, far from the more than 2 billion seen in late May and early June. On the options front, out-of-the-money call trading, something that has helped fuel recent surges, has gone down the drain with total options volume hovering around a quarter of the peak seen on the market. last month.
Millions of viewers have also streamed new movies like “Black Widow” and “Space Jam 2” online, staying away from movie theaters.
The discomfort is becoming more and more visible for the actions of one-off memes who see huge gains evaporate. Newegg Commerce Inc. wiped out about 60% of its value in less than two weeks after climbing 287% in three days.
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