HomeEntertainmentThe meme stock mania...

The meme stock mania is now a movie. Here’s what has happened to GameStop and AMC

  • The new movie “Dumb Money” dramatizes the 2021 meme stock saga.
  • On Thursday, GameStop closed more than 78% below its all-time high. AMC was down more than 97% from its peak.
  • Many social media traders discussed the meme stock moment in David vs Goliath terms — retail traders versus hedge funds.

A scene from the trailer for the film: Dumb Money

Courtesy: Sony Pictures Entertainment

As shares of GameStop start to climb in late 2020 and the early days 2021, in the midst of the pandemic, characters in the new movie “Dumb Money” encourage their friends to sell.

There’s Pete Davidson, playing the brother of Paul Dano’s Keith Gill, aka Roaring Kitty, telling the burgeoning YouTube star to cash out and buy a Ferrari. There’s Anthony Ramos’ Marcus, a GameStop cashier, being lectured by his parents that this stock trading thing isn’t real. And there’s America Ferrera’s Jenny, a nurse and single mom, whose coworker tells her that taking financial advice from a guy in a headband is not the best use of her time or money.

But those characters and the others in the film, which hits theaters this weekend, don’t just ignore that advice. They double down, buying more shares and options, and start to incessantly check their phones and TV news to see how high the stock is climbing.

“Diamond hands … we’re going to hold the line,” Jenny says.

The very peak of the meme stock mania, which saw retail traders encourage one another on social media sites like Reddit’s WallStreetBets to buy and hold heavily shorted stocks, came on Jan. 27, 2021.

That’s the day GameStop hit its all-time closing high of $86.88 per share, and saw more than 373 million shares change hands. One year earlier, in 2020, GameStop traded about 8.5 million shares on the same day.

That was also the highest volume day on record for theater chain AMC Entertainment, topping 142 million — up from less than 400,000 on the same day a year earlier. Shares of AMC would hit their own record high in June.

The excitement has since ebbed, even if it hasn’t gone away completely, and traders who bought shares on that day would now be deeply in the red. On Thursday, GameStop closed more than 78% below its all-time high. AMC was down more than 97% from its peak.

Many social media traders discussed the meme stock moment in David vs Goliath terms — the retail traders versus the hedge funds.

And the retail traders won at least some of the battles. The massive spikes in the stocks were caused in part by “short squeezes,” which occur when a rising stock forces those investors who bet against the company to cover their position by buying back shares to limit their losses, creating a feedback loop that pushes the stock even higher.

The losses caused Gabe Plotkin, a short-seller played by Seth Rogen who bet against GameStop with his hedge fund Melvin Capital, to completely shut down his fund.

There were also accusations of fraud.

The high level of short interest, and appearances by several meme stocks on the SEC’s “fail to deliver” lists, fueled theories from retail traders that there was “naked” or synthetic short trading going on. An SEC staff report on GameStop found no evidence of naked short selling, however.

Another center of the controversy was the brokerage firms themselves, particularly Robinhood.

Several brokerages limited trading in meme stocks at the height of the meme stock mania. The massive moves in the stocks, combined with heavy options trading activity, appeared to overwhelm the ability of companies like Robinhood to manage risk.

Robinhood itself went public in July 2021. The stock is down more than 70% from its IPO price.

As for the meme stock companies themselves, it is still unclear whether the fundamental theories of some Reddit traders were correct.

The GameStop turnaround efforts of Chewy co-founder Ryan Cohen, who became something of a hero to the retail traders, have shown little sign of working. Former Amazon executive Matthew Furlong was ousted as GameStop CEO in June after about two years on the job, just one move in a series of executive shakeups at the company.

The financial results have also been underwhelming. The company generated just under $1.2 billion in net sales in the second quarter of 2023, its most recent report. In the second quarter of 2019, before the meme stock mania began, the company generated about $1.3 billion in net sales.

Meanwhile, AMC CEO Adam Aron has leaned into the meme stock status for the theater chain, offering rewards like popcorn for shareholders.

The company has also used its popularity to raise additional cash by selling more shares. AMC announced on Wednesday that it had raised more than $300 million in an equity raise made possible by a corporate finance maneuver involving preferred stock it called APE shares — a cheeky reference to one of the references Redditors adopted for themselves.

The new cash has certainly been a big support for AMC with the box office still struggling to reach pre-pandemic levels, but the theater chain also made the curious move to buy a stake in a gold mine.

The AMC stock sales have diluted the holdings of individual shareholders, and the market cap of AMC is still down more than 50% from its peak.

For the Wall Street titans who became the enemies of Reddit traders, the results have been mixed. Several short-sellers have said they pulled back from that business after the meme stock squeezes, though other trading firms likely made profits in the highly volatile markets.

And even after his fund sustained heavy losses, Plotkin still had a enough money to buy a controlling interest in the Charlotte Hornets NBA Franchise.

A scene from the trailer for the film: Dumb Money

Courtesy: Sony Pictures Entertainment

At the end of “Dumb Money,” the movie shows the gain in net worth of many of the retail traders who sold their shares, presumably near the top. Several of the characters made more than $100,000 on their trades.

But Jenny, the nurse character whose Reddit name was “StonkMom,” was still holding on to the stock — her net worth having dropped back below zero.

Source link

Most Popular


Please enter your comment!
Please enter your name here

More from Author

Read Now

The Second G.O.P. Debate: Republicans Scramble for Airtime as Second Debate Kicks Off

Seven Republican presidential hopefuls not named Donald J. Trump will gather on Wednesday at the Ronald Reagan Presidential Library in Simi Valley, Calif., with the pressing task of securing second place in the Republican Party’s nominating race — and the ultimate mission of actually challenging the...

SAG-AFTRA & Studios To Meet Monday – Update

NDZ/Star Max/GC Images UPDATED with day confirmed: As Deadline first told you yesterday, SAG-AFTRA and the AMPTP are meeting next week. The actors guild and the studio reps released a joint statement Wednesday evening saying that both sides are coming back to the table on Monday, October...

Will Aaron Rodgers show up for Sunday night’s Chiefs-Jets game?

Jets quarterback Aaron Rodgers hasn’t attended one of his team’s...

Why Sharon Osbourne Warns Against Ozempic After She Lost 42 Pounds – E! Online

Ozempic is no laughing matter for the comedian. Handler revealed her "anti-aging doctor" prescribed her the medication without realizing what the drug was. "I didn't even know I was on it," she said during the Jan. 25, 2023 episode of Call Her Daddy. "She said, 'If you ever...

PlayStation Boss Jim Ryan Is Retiring From Sony in March

Jim Ryan, chief executive officer of Sony Interactive Entertainment, is stepping down after almost 30 years with the company.The boss of Sony’s lucrative PlayStation video-game unit will retire in March 2024, the company said Wednesday in a statementBloomberg Terminal. He joined Sony in 1994, just before...

PlayStation leader Jim Ryan to retire after 28 years with Sony

Jim Ryan, the head of PlayStation and CEO of Sony, is stepping down. In a press release on Wednesday, Sony announced that Ryan will retire in March 2024, while Sony Group Corporation president and chief operating officer Hiroki Totoki will become the interim CEO of Sony...

Saleh, players OK with Rodgers calling out Jets

Rich CiminiESPN Staff WriterSep 27, 2023, 05:49 PM ET3 Minute ReadFLORHAM PARK, N.J. -- New York Jets coach Robert Saleh and key veteran leaders had no problem with injured quarterback Aaron Rodgers -- in absentia -- calling out the team for its sideline squabbles. They agreed...

NFL Injuries Week 4: Tracking Every Injury, Including the Latest on Jaylen Waddle, Austin Ekeler, David Montgomery, and Christian Watson

Injuries are an unfortunate reality of NFL life, but everyone who follows the league — fantasy football players, sports bettors, and fans of teams — wants the latest health information. In that vein, we’re tracking every NFL injury ahead of Week 4. Let’s review the injury report...

MTG and Boebert Try to Out-Troll Each Other Days Away From a Shutdown

With a government shutdown four days away, thanks largely to House Republicans’ inability to stop fighting amongst themselves, far-right Reps. Marjorie Taylor Greene and Lauren Boebert thought it important to focus on their pet grievances on Wednesday. Greene successfully used the Holman rule to attach an...

Lina Khan vs. Jeff Bezos: This Is Big Tech’s Real Cage Match

Jeff Bezos made his fortune with one truly big idea: What if a retailer did everything possible to make customers happy?His forcefully nurtured creation, Amazon, sold as many items as possible as cheaply as possible and delivered them as quickly as possible. The result is that...