Is it the end of meme stocks?

Last week, shares of firms that have been popular on Reddit boards have plummeted, with Carver Bancorp and AMC losing more than a fifth of their worth.

AMC and Gamestop

AMC’s stock lost over 2%, reversing positives from Thursday, when it gained nearly 8% in trade. Last week, the company has lost more than 20% of its value, making it one of the largest losers as a strong run-in meme companies began to fade. GameStop gained more than 1%, extending a premarket fall and bringing its week-to-date loss to almost 13%.

Source: Ars Technica

Clover Health Investments Group

Clover Health Investments Corp., which soared almost 85 percent in a single day in June before losing 38 percent in July, is another huge loss. Its stock was trading for less than $8 a share in mid-May before skyrocketing to over $22, and shares were trading for less than $9 on Thursday.

Why are meme stocks falling?

The sharp decline in shares championed by individual investors on social media and in online forums demonstrates the market’s vulnerability for these small firms.

Searches for simple phrases like “investment” and “purchase stocks” have dropped to levels not seen in almost a year, according to Google Trends.

What they’re saying is this: Nicholas Colas, co-founder of DataTrek Research, believes this is a “very terrible sign” for meme stocks.

“To our perspective, the evidence here indicates that the spike in US retail investor enthusiasm in investment has come to an end,” writes Colas.

“To be relevant, any craze requires new devotees (i.e., not just the same audience), and the Google chart shows that these are becoming increasingly scarce.”

The combination of stay-at-home orders and the development of free trading applications has drawn many individuals into stocks and options for the first time this year, and retail trading became a force in markets.

Meme stocks this year

GameStop has risen more than 750 percent this year, while AMC has risen more than 1500 percent, thanks to coordinated trades on Reddit boards, with purchasers urging each other to invest in specific companies. At the start of the year, GameStop was trading for around $20 per share, while AMC was trading for under $2. In comparison, the S&P 500 index has increased by little over 16%.

AMC Entertainment
Source: Deadline

Stocks that have recently grabbed the interest of individual investors are also falling, demonstrating the market’s volatility. After surging 150 percent last week, Carver Bancorp Inc., a banking services firm, is down about 30% this week. The stock began trading in June at around $9 per share and has since more than quadrupled in price.

AMC cancels shareholder vote

AMC cancelled a plan last week for a shareholder vote to possibly issue 25 million extra shares in the wake of the current slump. Since January, it has issued approximately 100 million new shares and converted debt to equity.

Despite the rocky road, many individuals still trust in meme stocks. On the WallStreetBets forum on Wednesday, a Reddit member with the handle u/Gold-Educational posted “Not giving up on AMC, buying more.” The individual posted a snapshot of an AMC stock portfolio, which showed a 51 percent loss.

Is it the end?

Crazes seldom persist, even if there will always be strange causes for stocks to go drastically up or down over short periods of time.