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‘Meme stocks’ had a bit of a revival recently, as GameStop stock swung from about $18 on May 10, to as high as $64.83 on May 14, then back to $20 on May 17 – all on effectively no news.
$GME trading volume was 187 million shares on May 13 and 207 million shares on May 14, compared with less than 10 million shares per day for most of 2024 to date.
It was a decent run but still a far cry from January 2021, when $GME soared almost 30-fold on ADV that sometimes exceeded 700 million shares, before sinking back down within a few short weeks.
But this month’s volatility did catch the attention of the market and the financial news media. And it came just weeks after Reddit, the forum social network which has been the hub of retail traders’ meme-stock discussions, went public in an IPO.
The meme-stock craze is very much a 2020s phenomenon, and it hasn’t been just a curiosity in a small corner of the market – the US Securities and Exchange Commission deemed it important enough to publish a 44-page report about it in 2021.
But the concept of retail investors banding together and flexing their muscle isn’t new.
Back on May 22, 1996, memes existed but they weren’t in the common vernacular or closely associated with stocks. But the description of Iomega’s stock gyrations, This Day in Financial History, resonates:
“Iomega Corp., the maker of Zip disk drives, becomes the first lovechild of the Internet investing boom. Boosted by individual investors egging each other on in newfangled forums called “chat rooms” and “bulletin boards,” the stock hits $27 a share (adjusted for two stock splits in the previous four months). Even though it’s followed by almost no Wall Street analysts, the stock is up 2,135% over the previous year. Unfortunately, exactly one year later, Iomega stock will end up at $8.625, a 68.1% loss.”
We must appreciate the colorful language – maybe not so much the slightly uncomfortable “lovechild” reference, but “individual investors egging each other on in newfangled forums” is just about the best description of memesters’ activity that we’ve seen.
What became of Iomega? Alas, it didn’t live long and prosper. According to Wikipedia, the maker of data storage products was acquired by EMC Corporation in 2008, and then by Lenovo, which rebranded the product line as LenovoEMC before it was discontinued in 2018.
Whither GameStop and the knock-on meme stocks such as AMC Entertainment? Big-picture, both firms have struggled with poor operating results and dated business models, which suggests that they may well go the way of Iomega. But GameStop and AMC have both wisely raised capital by selling shares during price run-ups, which buys them some time at the least, and at the most will enable an opportunity for reinvention.
Will the SEC reassess GameStop given recent trading? Three years ago, the regulator didn’t really conclude anything one way or the other, it just said the 2021 brouhaha presented “an opportunity to reflect on the market structure and regulatory framework and identify additional areas for potential study and further consideration in the interests of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation.”
This time around, Gary Gensler & Co. are probably just hoping it all fades away. They might get their wish – as of Wednesday, May 22, $GME was down just 3% on the week.
