Meme Stock Crash Costs Speculators $48.9 Billion

1 year ago 224

The meme banal rally was fun portion it lasted. But it's handing retired an costly acquisition present that it's falling isolated much than the S&P 500 for now.


A astir monthlong descent successful stocks is mercilessly pounding online Reddit traders' favorites, similar AMC Entertainment (AMC), GameStop (GME), Peloton Interactive (PTON) and the Donald Trump affiliated Digital World Acquisition (DWAC). Those are among the hardest hit, says an Investor's Business Daily investigation of information from S&P Global Market Intelligence and MarketSmith. The investigation looks astatine the 25 most-popular stocks with meme traders positive those astir highly shorted compiled by Solactive for the upcoming Solactive Roundhill Meme Stock ETF.

Some of the symptom is brutal.

These 25 stocks, connected average, are down 25% successful conscionable a month. And that adds up to a achy $48.9 cardinal nonaccomplishment connected them successful conscionable 4 weeks. In comparison, the S&P 500 is nether pressure, too, but it's lone down 2.7% successful a month. It's the archetypal clip galore of the speculators playing these risky stocks, galore with nary fundamentals, person seen losses.

"We person galore investors who don't person existent extent and acquisition successful the markets close present and, utilizing the analogy of going to a casino, the worst happening that tin hap is that the archetypal clip you go, you triumph big," said Eben Burr, president of $2.2 cardinal successful assets advisory Toews. "Then you support going backmost and whitethorn get reckless — you're not arsenic skilled arsenic you judge and the location yet wins. Meme stocks person to beryllium seen arsenic a precise speculative move."

Assessing Brutal Meme Stock Damage

Meme banal symptom is reaching levels their fans haven't seen before.

A customized market-cap weighted scale of the 25 stocks topped retired connected Jan. 27. And since past it has collapsed much than 24%. Much of that symptom has happened successful conscionable the past 4 weeks, with the scale dropping much than 17% successful that time.

Some of the idiosyncratic stocks person done overmuch much poorly. Peloton is the worst of them all, plunging 52% successful conscionable a period and falling much than 70% from the clip meme stocks peaked. That nonaccomplishment unsocial outgo investors $13 cardinal successful conscionable a month.

GameStop, too, is gobbling up speculators' quarters fast. The archetypal meme stock is down astir 21% successful a month, sucking much than $3.4 cardinal retired of investors' portfolios. And it mislaid much than fractional its worth from the meme banal high.

And Digital World Acquisition wasn't trading yet successful January erstwhile meme stocks peaked. But it's already mislaid a 3rd of its worth successful conscionable a month.

What's Next For Meme Stocks Vs. The S&P 500?

Fans of meme stocks mightiness constituent retired they're inactive up for the year. That's true. But they're lagging the S&P 500 now.

Take theater concatenation AMC Entertainment. It's inactive up immense for the twelvemonth and it's adjacent up 40% from the meme peak. But successful conscionable 1 period shares are down much than 30% to 40.79. That's overmuch worse than the S&P 500's 2.7% driblet successful that time.

And that's the point. Meme stocks are present lagging the market, adjacent if you see gains from the commencement of the year. The scale of the 25 meme stocks is present up conscionable 5% for the year. Had you conscionable bought the S&P 500, you'd beryllium up overmuch much than that — 20.9%. And that doesn't adjacent see the S&P 500's 1.4% dividend yield. Investors mostly bash overmuch amended by following dependable investing rules.

Now that's a pugnacious acquisition to take.

Meme Stocks Are Crashing

All but 2 of the 25 apical meme stocks dropped successful the past month

Company Symbol 1-mo. % ch Market worth alteration 1 period ($ billions)
Peloton Interactive (PTON) -52.3% -$13.1
fuboTV (FUBO) -50.1 -2.4
Upstart Holdings (UPST) -47.9 -11.6
Clover Health Investments (CLOV) -45.4 -1.3
Robinhood Markets (HOOD) -40.3 -12.8
DraftKings (DKNG) -39.1 -7.4
Beyond Meat (BYND) -37.9 -2.5
ContextLogic (WISH) -37.5 -1.2
SoFi Technologies (SOFI) -34.9 -6.2
Penn National Gaming (PENN) -34.6 -4.2
Marathon Digital Holdings (MARA) -33.5 -2.0
Digital World Acquisition (DWAC) -33.4 -0.8
AMC Entertainment Holdings (AMC) -31.6 -6.6
Virgin Galactic Holdings (SPCE) -27.9 -1.4
Rush Street Interactive (RSI) -25.1 -0.3
GameStop (GME) -20.7 -3.4
Cassava Sciences (SAVA) -20.0 -0.5
Tilray (TLRY) -17.4 -0.9
Best Buy (BBY) -16.3 -5.0
Sundial Growers (SNDL) -14.1 -0.2
Cleveland-Cliffs (CLF) -12.3 -1.4
Riot Blockchain (RIOT) -10.6 0.3
ZIM Integrated Shipping (ZIM) -1.6 0.1
Lucid Group (LCID) 25.4 16.3
Roblox (RBLX) 42.7 19.7
SPDR S&P 500 ETF (SPY) -2.7
Sources: IBD, S&P Global Market Intelligence

Follow Matt Krantz connected Twitter @mattkrantz


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