Meme mania is back and warping the equity markets – many thought they were left for dead.
They have come back in the past week as GameStop (GME) and AMC (AMC) shares have doubled.
The doubling isn’t just because of the extremely oversold nature of the stock market.
It’s not only that.
Even more critical, meme companies are finally embracing who they are – highly speculative in nature and presenting it as a positive to their investor base.
Management has gotten the memo and is pushing the boundaries yet again by stirring up the pot.
Readers with strong stomachs should only consider GME and AMC if they are willing to lose 100% of their principal because these stocks are in no way long-term buy and hold material.
Many traders have already gotten rich by catching parabolic moves, and management’s behavior signals there will be more to come from these highly volatile stocks.
Earlier this month AMC announced it was buying a stake in gold and silver miner Hycroft Mining Holding Corp (HYMC).
Acquiring a major stake in a tiny gold and silver miner that has been on shaky financial ground from a distance appears somewhat bizarre.
CEO Adam Aron is now starting to think more outside the box and traversing industries could play to their alternative audience.
Aron doesn’t need to play to institutional money since it was them that created high amounts of short interest in the stock.
Retail traders are the target audience and third-party external M&A announcements going forward where AMC can reach for the stars could whip up this base of investors.
They are taking over a highly dysfunctional miner with past management problems.
Now Aron views this company as an upstart minnow waiting for a turnaround story at a time when commodities are red hot.
It’s yet to be seen whether this type of move will impact the narrative of AMC but getting AMC out of the movie theatre business should be paramount.
Netflix has effectively killed the movie theatre business during covid and getting into commodities in a high inflationary environment is more sensible.
GME CEO Billionaire Ryan Cohen's investment company bought 100,000 shares of GameStop Corp taking Cohen's stake marginally higher to 11.9%, with the total number of shares owned at 9.1 million.
An oversized reason for the spiking shares is that there is still loads of short interest in these stocks.
Institutional money is still betting on big down moves and when the reverse happens, they must buy back the stock at higher prices to close positions which drives the stock even higher.
Cohen is also hoping to diversify GME’s business from a retail video game store.
He co-founded online pet products retailer Chewy and earlier this month said he now owns nearly 10% of Bed Bath & Beyond and wants the home goods retailer to explore alternatives including a full sale of the company.
He also plans to modernize GMEs business by building a NFT marketplace.
The management at these companies has realized that they can’t stand pat with the current businesses they overlook because they are outdated and lack sustainability.
The spiking stock price has offered them financial gunpowder to go after industries they never even thought about before as well as giving them more financial slack.
Upgrading their business model could go a long way to suppressing volatility in these stocks and making them into appealing long-term buy and hold companies.
They are a long way off from that today, but everyone needs to start somewhere.
