Chicago, Illinois – Shares of GameStop and AMC fell in premarket trading on Wednesday as the meme stock trading frenzy began to show signs of slowing down. GameStop, a brick-and-mortar video game retailer, saw a 13% drop in premarket trading, while AMC, a movie theatre chain, experienced a 12% decrease. Prior to this decline, GameStop and AMC had seen impressive gains of 179% and 135% respectively earlier in the week.
The sell-off in AMC shares followed an announcement by the company regarding a debt-for-equity swap. AMC revealed plans to issue 23.3 million shares in exchange for $163.9 million of bonds set to mature in 2026. Additionally, AMC had recently completed a $250 million stock sale on Monday.
Both GameStop and AMC had experienced significant rallies and trading volume surges at the beginning of the week. However, the retail interest this time around appeared to be much smaller and short-lived compared to previous instances. Data from Vanda Research showed that net retail trader inflows for GameStop and AMC on Monday were $15.8 million and $37.5 million, respectively, significantly lower than the peak daily inflows observed during the meme stock craze of January 2021.
The resurgence of the meme stock phenomenon was sparked by a social media update from “Roaring Kitty,” also known as Keith Gill, a former marketer for Massachusetts Mutual Life Insurance. This update led to a surge of over 70% in GameStop and AMC shares on Monday, which continued into Tuesday. However, enthusiasm appeared to wane by the end of the trading session on Tuesday.
Smead Capital Management CEO, Cole Smead, weighed in on the meme stock craze, describing it as “frankly stupid.” He characterized it as gambling during an appearance on CNBC’s “Street Signs Europe.” The fluctuations in GameStop and AMC shares reflect the volatile nature of meme stocks and the influence of social media and online communities on financial markets.
In conclusion, the unpredictability and rapid shifts in meme stock trading highlight the evolving landscape of retail investing and the challenges it presents to traditional financial norms and institutions. The impact of social media influencers and online communities on stock prices continues to be a topic of interest and scrutiny in the finance world. As investors navigate these turbulent waters, staying informed and cautious is paramount in managing risk and making informed decisions.