In late July, equities such as Kohl’s, GoPro, and Krispy Kreme saw wild trading, reminiscent of the 2021 Game Stop and AMC rallies.
It’s the newest category of meme stocks, which are businesses whose share values fluctuate significantly and aren’t determined by their core fundamentals.
With NBC 7, you can watch San Diego News for free, anywhere, at any time.
Usually, meme stocks are inexpensive. For instance, Kohl’s share price has decreased by almost 40% in the last 12 months.
Kohl’s is still a well-known brand even though its sales and profitability have decreased recently.
With our News Headlines email, you can receive the best local San Diego stories every morning.
“It’s a household name, and it’s much easier to get people interested and excited about manipulating a household name than it is with a relatively unknown stock,” Neil Saunders, managing director of GlobalData, stated. “I think that recognition is quite important in allowing almost the meme or the narrative to spread, and for more people to jump on the bandwagon.”
Additionally, meme stocks are sometimes significantly shorted, which indicates that investors have placed bets on their decline.
According to FactSet, roughly 47% of Kohl’s, 28% of Krispy Kreme, and 9% of GoPro’s outstanding shares are sold short.
Money Report
Private company hiring bounced back with a 104,000 increase in July, ADP says
Apple is facing pressure from Wall Street to figure out its AI strategy
Investors short stocks by borrowing shares from brokers and then selling them on the open market. When the share’s price drops, the investor intends to repurchase it and keep the proceeds from the original sell.
When it comes to meme stocks, hordes of speculators band together on websites like Reddit in an effort to raise the share price. Investors who shorted a stock will also repurchase their shares to reduce additional losses if the firm’s price increases rather than declines.
“This type of extremely strong feedback loop is what you wind up with, pushing and inflating the share price. And it goes without saying that those engaged in this, who are buying and selling, can profit from these somewhat erratic fluctuations,” Saunders stated.
To find out more about how businesses like Kohl’s turn into meme stocks, watch the video.This report was provided to by Gabrielle Fonrouge of CNBC.
Also on CNBC
-
How companies like Kohl’s become a meme stock
-
How the ultra wealthy travel in Madrid
-
Inside some of Florida’s most high-end gated communities
