GameStop and AMC, two popular meme stocks, experienced significant drops in their share prices on Wednesday. GameStop, a brick-and-mortar video game retailer, saw a decline of 29%, while AMC, a movie theater chain, dropped by 22%. This came after both stocks had seen impressive gains earlier in the week, with GameStop up 179% and AMC up 135%. The sell-off in AMC shares was particularly impacted by the company’s announcement of a debt-for-equity swap, where they issued 23.3 million shares in exchange for $163.9 million of bonds that mature in 2026. Additionally, AMC completed a $250 million stock sale on Monday, further affecting its stock price.
Retail Interest in Meme Stocks Declining
Both GameStop and AMC had experienced massive rallies and increased trading volumes at the beginning of the week. However, this time around, the retail interest in these meme stocks seems to be much smaller and short-lived. Data from Vanda Research shows that the net retail trader inflows for GameStop and AMC were significantly lower compared to the peak levels seen during the epic mania of three years ago. For example, on Monday, GameStop and AMC saw net retail trader inflows of $15.8 million and $37.5 million, respectively. This is a stark difference from the peak daily inflows of $87.5 million for GameStop and $170 million for AMC seen in late January 2021.
Reigniting Speculative Run with Social Media Update
The resurgence of the meme stock phenomenon was triggered by a social media update from “Roaring Kitty,” also known as Keith Gill. Gill, a former marketer for Massachusetts Mutual Life Insurance, gained fame on Reddit as DeepF——Value for leading a group of day traders into GameStop in 2021. His recent post, featuring a picture of a video gamer sitting forward on their chair, reignited the speculative run on Monday. This led to GameStop and AMC shares increasing by more than 70%. However, the enthusiasm started to fade by the end of the trading session on Tuesday.
The recent drops in GameStop and AMC shares indicate a cooling off of the meme stock frenzy that had captured the attention of retail traders earlier in the week. The impact of AMC’s debt-for-equity swap and the waning retail interest in these stocks suggest a shift in market dynamics. It remains to be seen how these meme stocks will perform in the coming days as the frenzy subsides.