Meme shares

Meme stocks are assets whose price increases significantly due to the creation of excitement in social networks and other media. As a result of the activity of private investors in online communities, excitement is created, which begins to affect the price of individual shares on trading platforms. A characteristic feature of a meme stock is the large number of shorts on it on exchanges.

Most often, the beginning of 2021 is taken as the starting point for the appearance of meme stocks, when there was an extremely sharp jump in the shares of the GameStop company. The growth of shares was due to a large volume of short-term transactions on the asset.

The prerequisites were there back in 2012. On the American forum and social network Reddit A community of non-professional investors, WallStreetBets, appeared, whose members discussed shares of young companies, sent each other humorous pictures and predicted growth in quotes. Predictions rarely came true, and experienced investors made fun of the community because of this.

In late 2020, the Wallstreetbets community agreed to go against the big funds by choosing Gamestop. The motive was noble: Gamestop is undervalued, and Wall Street bigwigs are profiting from its misfortune.

Community members began to buy shares. At first, this had no effect - funds began to short even more actively in the expectation that private investors would soon calm down. But they did not give up, and soon professional traders joined them and also went long.

As a result, a short run occurred in January 2021. Gamestop shares soared by hundreds of percent. Hedge funds that bet on stocks falling lost about $6 billion in a month.