How AMC and GameStop became Reddit faves
June 10, 2021. Summarized by summa-bot.
Compression ratio: 30.9%. 2 min read.
Portland, OR, USA - Jan 27, 2021: The mobile app icons of Reddit and GameStop are seen on an iPhone. GameStop's stock soars as small traders from a Reddit group team up against big institutions.
You've probably heard of the FAANG stocks: Facebook, Amazon, Apple, Netflix and Google owner Alphabet. But it's the BANG stocks of Reddit WallStreetBets meme fame that are now taking the investing world by storm.
And that riles the passions of the Reddit crowd, many of whom view short-selling -— when an investor borrows a stock and sells it with hopes of buying it back at a lower price and pocketing the difference as a profit — as a rigged part of the investing game designed to benefit fat cat hedge funds.
The Reddit crew is looking for underdogs that Wall Street pros think are relics: BlackBerry (BB) and Nokia (NOK) got left behind when everybody started buying iPhones and Androids, while AMC (AMC) and GameStop (GME) have both been hit hard by the pandemic, plus shifts in how people watch movies and play video games.
The term "meme stock" may sometimes be used pejoratively, but the fact is Reddit investors are sophisticated enough to realize that by targeting stocks that are heavily shorted and don't have a sizable amount of shares available for trading, there's a chance to help fuel what's known as a short squeeze.
"This is the perfect storm for an epic short squeeze: the mother of all short squeezes," said one Reddit user about AMC on Thursday.
Still, investors who bet against the meme stocks need to realize that the so-called apes, a term that many investors on Reddit use to describe themselves, are playing the long game.
"We are in this for the long haul," said one Reddit user in a post about GameStop, BlackBerry, AMC and ContextLogic, adding that the stocks are "absolutely primed for a squeeze. "
Meanwhile, not all Reddit-approved stocks are wrapped up in a battle between retail investor longs and hedge fund short sellers.