The retail investing craze that inspired a predictably mediocre Hollywood movie is vying for a sequel.
Driving the news: Krispy Kreme and GoPro have joined a resurgent meme stock rally, climbing ~31% and ~53% over the last two days, respectively, despite no change in their underlying businesses. Other companies, including Kohl’s, have seen similarly absurd spikes in trading.
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On Tuesday, Krispy Kreme was trading at 71 times its average daily volume over the past four years, while Kohl’s stock surged as high as 105% in pre-market trading before it was temporarily halted for volatility.
Why it’s happening: The spike is once again being driven by the r/WallStreetBets page, a subreddit with almost 19 million members, which often encourages retail investors to buy shares in companies that institutional investors have heavily bet against.
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Kohl's certainly fits that bill. According to FactSet data, short sellers have taken positions against half of the struggling retailer’s outstanding shares.
Why it matters: The original meme stock craze saw GameStop surge over 2,700% in three weeks, before the inevitable selloff erased US$167 billion in a matter of days. As experts pointed out after the fact, it was the retail investors — many of them completely new to investing — who paid the price for that collapse.
Zoom out: These meme stock traders are a small portion of what’s otherwise become a serious investor class. As more people take charge of their own investments, retail investors are expected to account for over 61% of all global assets under management by 2030.—LA
