What are Meme Stocks and How Are Retail Investors Joining Forces?

Introduction

The mania of meme stocks that started in January with GameStop Corp, shows no signs of slowing down.

The 8th of June saw meme stocks, such as Wendy’s, Clover Health, and AMC Entertainment, go up for a second consecutive day, thanks to the innuendos caused on social media that led to the Wall Street rumblings ever since the start of 2021.

What Are Meme Stocks?

Meme stocks should not be confused with meme coins like shiba inu or dogecoin. The coins are a literal parody of tokens, while meme stocks are regular stocks for actual companies that run actual businesses.

However, the mixture of FOMO (Fear of Missing Out) and hype led to sharp increases in stock prices, with a complete disregard for the underlying assets’ fundamentals.

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How Are Retail Investors Joining Hands?

The sharp spikes in meme stocks’ value is a result of social sentiment, namely the hoopla introduced by the largely young retailer investor army present on Reddit. These traders are operating with the objective of outperforming professional investors with huge bets placed on a bunch of companies seemingly going out of operations.

This army, made up of almost 10 million soldiers, has used its tech savvy skills to not only remain relevant, but achieving its purpose of competing with hedge funds.

The retail traders have leveraged Twitter and Reddit to enable investors to perform a collective analysis of the market strategies and trends. Investors can put up analyses or ask questions on the forums and await responses from all around the world.

Additionally, through the power of viral memes and other posts, traders have managed to not just identify trends but also create them. When huge quantities of people notice the same meme or link being shared over and over again on the internet, it leads to buying – and even selling – frenzies.

The retail trading army has made effective use of social media in order to drive mass camaraderie and coordination. WallStreetBets, for instance, is filled with smart discourses, in-depth analyses, and extremely shareable memes – some of which contain several thousand comments. All of this leads to a passionate online group that is not only open to collective thinking, but is also extremely loyal.

Thanks to social media, the investment landscape is now democratic, even if disrupted. Making use of the internet’s reach is a smart move that retail investors should certainly be applauded for.