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What are "meme actions"?

2021-06-04T23:24:07.750Z


Investors have been touched by the phenomenon of "meme shares" that has led many to win or lose. AMC shares rise thanks to Reddit 1:01 (CNN Spanish) - To begin with, the “stock meme” is one of the best examples of the influence of popular culture in financial markets. Thus, this year investors have been touched by the "stock meme" phenomenon that has led many to win or lose. The phenomenon, which emerged on the platforms of "amateur" investors, has escalated to influence the stock prices o


AMC shares rise thanks to Reddit 1:01

(CNN Spanish) -

To begin with, the “stock meme” is one of the best examples of the influence of popular culture in financial markets.

Thus, this year investors have been touched by the "stock meme" phenomenon that has led many to win or lose.

The phenomenon, which emerged on the platforms of "amateur" investors, has escalated to influence the stock prices of at least 5 companies.

As an example of the strength of memes, the prices of shares, such as GameStop, rose 600% in a week as many investors bought them after comments on platform chats, such as Reddit, and on social networks.

Therefore, here we tell you the origin of the "stock meme".

What are "stock memes"?

The "stock meme" are securities of companies that have risen in price due to comments on trading platforms from individual investors or because they become viral on social media.

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Purchase recommendations encourage many individual investors to purchase them, which increases their price.

When did meme actions arise?

It was last January that minority investors who share information and comments on the WallStreetBets chat on the Reddit platform realized how the shares of GameStop, a video game retailer, were being attracted to hedge funds.

These funds carry out short operations, that is, they borrow shares in a company and sell them, hoping to buy them back at a lower price and keep the difference.

But if the price rises dramatically, these investors are forced to buy back to limit their losses, further fueling a rally.

This is what is known as a

short squeeze

.

It's a David vs. Goliath fight.

An example

While minority investors made comments in the chats of transactional platforms, such as Robinhood, others posted the memes on social networks, such as Twitter, following the purchase of shares of companies that are the subject of short operations.

There's this high tech firm called GameStop pic.twitter.com/lE5J2ZcXWG

- genz (@ genz75) January 27, 2021

GameStop sitting amongst Tesla and Amazon after reddit users make it a Fortune 500 company pic.twitter.com/AVUtcjs6gl

- Jordan Deeb (@Jordan_Deeb) January 27, 2021

What are the effects?

Once investors became aware of the hedge fund's operations on GameStop, they began buying shares of the video game retailer, which led to a 1,625% price increase in January alone.

Thus, hedge funds that bet against GameStop and other stocks favored by Reddit were forced to take steps to offset their losses.

But the prices adjust

“Stock meme” prices skyrocket as retail investor frenzy increases purchase orders, but nothing is forever.

So we see the shares of AMC, a chain of cinemas, which were again driven by purchases from retail investors rose 120% in three days, but fell 20% a day later.

A similar move occurred with GameStop shares in February, after hot days.

What do the authorities say?

The Financial Services Committee of the United States House of Representatives summoned the CEOs of companies such as Robinhood, Reddit and Melvin Capital to a testimonial audience.

Robinhood was harshly questioned by lawmakers because in late January it suspended the trading of GameStop shares due to high demand.

With information from Allison Morrow, Jazmin Goodwin, Matt Egan and José Manuel Martínez

StocksGameStopStock Market

Source: cnnespanol

All news articles on 2021-06-04

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