A little over a week ago, Reddit absolutely exceeded expectations, soaring through its Wall Street debut.
Earlier this week, shares of Donald Trump’s Trump Media & Technology Group Corp., the company behind Trump’s conservative social media platform, Truth Social, did the same.
The successes of both companies demonstrate the sometimes significant influence of digital culture on the market. Or, to put it in simpler terms, the possible power of the meme.
The GameStop Short Squeeze Saga
Perhaps the most famous (or infamous, depending on who you ask) example of a meme stock is the story of GameStop stock.
GameStop is an American video game retailer. In the 2010s, as much of retail moved online and many video game products transitioned from physical to digital, the business began to decline.
In 2021, during the throes of the pandemic, Reddit users on the subreddit r/WallStreetBets argued that GameStop stock might be undervalued and noticed it had a short interest that exceeded 100% – it was shorted more than there were shares available.
Partly for this reason, partly because it was amusing, and definitely to “troll” Wall Streeters who had shorted the stock, the subreddit came together to drive up the stock price.
Soon, the story took off, and more people outside of r/WallStreetBets decided to join in on the fun and invest in GameStop. According to The Verge, on January 26, short-sellers had lost $5 billion on their GameStop position alone.
As the meme and the investment spree continued, the story spiraled. The White House began monitoring the situation. Keith Gill, one of the driving forces behind the GameStop stock jump, came under investigation. A major online trading platform, ironically named Robinhood, started restricting trading on GameStop. Lawsuits, a hearing at the US House, and massive bailouts followed.
Ultimately, GameStop’s stock mellowed out and has been more or less steadily declining since January 2021. However, it is still up more than 500% from five years ago.
Other meme stocks
GameStop was neither the first nor the last stock to see massive effects due to social media interference.
Also in 2021, meme stock investors caused movie theater chain AMC’s stock to jump 35% in another Reddit-fueled short squeeze.
In 2018, in a less community-driven story, Elon Musk’s meme-oriented tweets affected the price of Tesla stock: On August 7, 2018, he tweeted: “Am considering taking Tesla private at $420. Financing secured,” making the price of Tesla shares skyrocket, according to The Guardian, and ultimately leading to years-long litigation.
Going further back to 2013, an even earlier example of a meme stock-type phenomenon can be found in the creation of Dogecoin, a cryptocurrency named after a popular dog meme. The cryptocurrency saw a massive boom in 2021, peaking at $0.64 before ultimately dropping substantially. But, much like GameStop’s stock, Dogecoin is today valued higher than it was before its Reddit-boosted rally.
Meme stocks in 2024
Throughout 2022 and 2023, the meme stock market seemed to be slowly declining as the novelty wore off and many people returned to office work.
But, as the Reddit and Trump Media IPOs illustrate, online culture and its influence on casual traders remain factors to be felt in the market.
It would be remiss to think that, for meme stock investors, it is purely about making money. For many of these investors, meme stocks are a way of messing with and disrupting a system they perceive to be broken or unfair.
Reddit user ‘Spanky_Stonks’ exemplified this perspective in 2020, as quoted by Bloomberg, stating: “I’m an old millennial. I’m tired of getting screwed by globalist elites. This isn’t left or right republican [sic] or Democrat. It’s the 1% versus everyone else.”