Proactive Investors - Trading platform Robinhood Markets Inc (NASDAQ:HOOD), alongside BlackBerry (TSX:BB) Ltd and Virgin Galactic Holdings Inc marked just some of the beneficiaries of the latest meme stock craze.
Up 8.6%, 16.8% and 29.6% respectively in Tuesday’s early trading, the trio emerged behind GameStop Corp (NYSE:GME) and AMC Entertainment Holdings Inc in gaining a new lease of life after the return of meme stock frenzy engineer Roaring Kitty to X.
SunPower Corporation, Plug Power and Beyond Meat (NASDAQ:BYND) Inc also jumped on his return, which gave retail traders all they needed to drive the stocks up to the dismay of short sellers.
In what appeared to mirror the 2021 meme stock craze, traders again targeted heavily shorted stocks, which indicates bets that companies’ shares will fall.
SunPower, for instance, had 94.02% of its shares, against the number floated, tied up in short positions as of Tuesday, according to Fintel.
Some 40.97% BeyondMeat shares faced the same fate, while 28.89%, 28.07% and 8.34% of Virgin Galactic, Plug Power (NASDAQ:PLUG) and BlackBerry’s were shorted respectively.
Almost a quarter of GameStop’s had been shorted as of Monday, with the early week rally said to have dealt a US$838 million blow to hedge funds betting against the retailer, according to S3 Partners.
Finalto analyst Neil Wilson had explained that “a fair chunk” of GameStop’s move, equating to 74.4% on Monday and 56.8% on Tuesday, was likely “short-covering action”.
“Some hedgies will have had calls on their shorts,” he noted.
Given the key drivers of meme stock gains are social media-fuelled rallies, rather than market fundamentals, others highlighted risks of such tactics.
“The meme stock saga is a ready-made case study that can be taught in schools to highlight the dangers of FOMO investing,” interactive investor’s Myron Jobson said.
“While some people were fortunate to make money in a short amount of time by buying and then selling at the right moment during the social media-fuelled surge, many lost out once the bubble burst.”
Indeed, “the rally in meme stocks is at odds with the rest of the blue-chip market,” XTB’s Kathleen Brooks added, as the Nasdaq, S&P 500 and Dow Jones sat flat on Tuesday.