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After sweetest week since January, meme stocks end on slightly sour note

Thornton McEnery

If there was a meme for meme stocks, this week's choice would be "Kombucha girl," (link) the viral video of a woman trying the fermented tea drink and having a series of conflicting visceral reactions.

After spending four days spiking high enough and fast enough to create evidence of a second short squeeze in less than six months, shares in GameStop (GME) and AMC Entertainment (AMC) tumbled on Friday as investors headed into a long weekend.

For GameStop, it was a third substantial price pop in the videogame retailer since January's manic short squeeze made the stock a household name and a battleground for retail traders against hedge funds and market makers. Even with Friday's 12.7% loss snapping its six-session winning streak, GameStop still finished up more than 26.2% for the week, putting it back at levels not seen since March.

But for AMC, Friday's 2.1% stumble barely put a dent in this week's 112.7% rally even if the stock did briefly go over $35 a share early in the morning, its highest level since January 2017, according to Dow Jones data.

On Thursday, data from VandaTrack, a tracker of individual investor purchases, showed that retail flows had spiked back (link)to levels not seen since January.

While the reopening of movie theaters across the country should be factored into any valuation of the movie theater chain, the prime driver behind both stocks remains retail traders support and the market reaction to that support.

In fact, the key metrics for both stocks are increasingly less fundamental than esoteric with the stock market's answer to the Olsen twins appearing to move higher or lower on one phenomenon (link)that make the clearest case ever for the simplistic view that meme stocks come down to "The Reddit Crowd vs. The Shorts."

According to HypeEquity, which tracks mentions of individual stocks across various social-media platforms to compile what it calls "social sentiment analysis," both GameStop and AMC saw major spikes in social-media volume early in the week, the chatter on GameStop got quieter going into the Memorial Day weekend and dropped off 10% on Friday. Social-media interest in AMC remained high on Friday, up 150% in the afternoon, but not as high as the 600% gains seen on Wednesday and Thursday.

Increased social-media interest in mid-May appeared to augur this week's rally in both stocks, as it potentially did this week with BlackBerry (BB.T) and Beyond Meat (BYND).

And that chatter remains mostly optimistic if not defiant.

"I went from up to $520,000 today to up only $360,000," Ricknroll323 posted on Reddit board AMCStonks. "I dont care at all. HODL."

That sentiment was echoed on GameStop boards, albeit with a more weathered tone.

"Nobody likes Red," YumDump1 offered to his fellow users on GameStop board r/Superstonk, who often refer to themselves as apes. "But APES! Remember how ecstatic we were when we broke $200? We are still $25 ABOVE that! Stay ecstatic. Be ecstatic. Be Ape."

But on the opposite side of the equation are the perceived and clearly genuine enemies of the retail crowd: short sellers.

Ortex Analytics data shows the week ended with short interest of 21.4% on GameStop's float, compared with AMC's 17.9%. Those levels were both elevated on Friday by 2.9% and 3%, respectively. Both stocks remain some of the heaviest shorted in the entire US market.

Based on a cursory look at the end of GameStop and AMC's trading week, one clear factor appears to be AMC maintaining an active social-media presence while GameStop's supporters appeared to go quieter as the week progressed and both sides continued to tacitly accuse the other of manipulating the prices of meme stocks.

But even with both companies adding more than 1000% to their market caps in 2021 so far, it seems inevitable that meme stocks will continue to stay volatile after the long weekend as retail investors and short sellers take the extra day to recharge and take the winter's short squeeze battle into summer.

-Thornton McEnery; 415-439-6400;


(END) Dow Jones Newswires

05-29-21 0853ET

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