Hong Kong-based financial services startup AMTD Digital is up more than 3,000% in the past week, and is up more than 100% yesterday. why?
Stocks are discussed on the Reddit WallStreetBets forum (warning: strong language). The stock is up more than 20,000% since it went public on July 15. It was listed at less than $10 per share and is currently trading at $1,679.
AMTD Digital is part of the Hong Kong-based investment bank AMTD Idea Group (AMTD) which is currently trading at around $7 per share.
The company issued a statement on Tuesday, saying: “…expressed its appreciation for the support provided by the investor community to complete the initial public offering (“IPO”) of 16,000,000 American Depository Shares (“ADS”) at a price of $7.80 per announcement. During the period since our initial public offering, the Company has observed significant volatility in the price of our ADS and has also observed some very active trading volume. To the best of our knowledge, there have been no material circumstances, events or other matters relating to our Company’s business and operating activities since the date of the IPO.”
What is an arrow meme?
The meme stock is a pure kid of the 1920s. There is no clear definition. It is not a value stock or a growth stock. It’s just.
Jokes aside, meme stocks are stocks that are seeing big price increases, mostly fueled by people on social media (primarily Reddit, Twitter, and TikTok). These stocks rarely have company fundamentals that support price increases and are often highly volatile. So why do people buy it?
FOMO is one of the main drivers of investor buying. The term refers to the “fear of missing out,” coined by Patrick J. McGuinness in 2004 and it is largely used by closely related Millennials and Generation Z.
“This ‘fear’ is driven by the fact that so many of us are overwhelmed by updates about our social circle’s activities, to the point where some individuals feel they are ‘missing out’ if they do not actively participate in conversations or activities around the world,” explains Ian Tam, Director of Investment Research at Morningstar Canada. The term is generally taken as a negative connotation, as it sometimes contributes to a person’s indecisiveness or over-commitment to commitments.”
The first notable example of stock memes in 2021 was the video game retailer GameStop (GME). The stock was trading at $19 a share at the start of the year, but by January 28, it had reached an all-time high of $483.
What is a meme?
The word meme (pronounced MEEM) is part of the Internet language. It is a way for social media users to quickly communicate an idea, style, trend or behavior. Initially, memes were a mixture of an image and a slogan. This is one example:
The original image is from the movie The Lord of the Rings: The Fellowship of the Ring. In this scene, the protagonist Frodo Baggins arrives at the house of the Elf Lord Elrond with the One Ring. Elrond summons a council to decide what to do with the ring, which can only be destroyed by the fire of Mount Dom, as it has been forged. The obvious solution is to move it to Mount Doom, and dump it. At this point, Boromir, Prince of Gondor (and as of this moment, not a very likable character), said, “One does not simply enter into Mordor. His black gates are guarded by more than mere orcs. There is evil that never sleeps. The Great Eye is always on the lookout.”
Now remember, most people who share the meme, especially in its early days, know this. They know the language is strange, and they also know that Boromir’s language is undesirable and pompous. Which is why laughing at it is funny, and in part why the meme kicked off.
This particular meme always begins with the words, “One is not simply…” at the top, and is usually something funny at the end, meaning that whatever the person is trying to do is either complicated or unenforceable. For example, if you’re trying to get tickets to the hit musical Hamilton, a friend might send you a picture of Boromir with the words, “One doesn’t get tickets to Hamilton.” Although this is how memes get started, the concept is much broader and includes gifs, videos, challenges and now, stocks.
Should you buy a meme now?
“No, investors should not buy meme mania — it should be contained in the world of day traders willing to speculate on momentum,” says Morningstar US chief market strategist David Sekera. “Part of the reason why meme stocks like this appear in the first place is FOMO, or fear of missing out, which is fueled by a lot of people touting about how much money they make in these trades. These positions aren’t what we consider an investment but rather are short-term momentum trades, Which means the stocks are not moved by changes in the company’s underlying fundamental value but are based on technical indicators.These positions often start with a short tight, then turn into a short term self-fulfilling prophecy on the way up.But once the bullish momentum runs out and the stocks start to decline See below – traders will be looking to get out of positions as quickly as possible and will hit any and all bids on their way down until they get out of their positions.”
In other words, he says, these situations aren’t exactly Ponzi schemes, but they do share some similarities. “The difference between the two is that the Ponzi scheme was created specifically as a heinous act to defraud investors,” Sekera says. Meme stock does not start out with criminal intent but attracts inexperienced investors who may not fully understand market dynamics and its valuation. The two are similar because you need either existing or new investors to go in continuously and buy shares at ever higher prices. Which means that while there will be Some of the investors who make money from these trades, and unfortunately, many of the investors who trade these stocks will eventually end up burning and losing money. Investors will need to be very careful getting involved in these situations.”
It offers four points to remember:
– Rocket ships will eventually burn out of fuel, and you certainly don’t want to be the last to buy.
To make real money, you have to be one of the first to start selling, and it is very difficult if not impossible to know when that exact time will come.
Many traders in these stocks claim to have diamond hands, which means they intend to hold the stock no matter what. However, once the stock starts trading and these traders start making losses, these diamond hands tend to dissipate quickly, and the resulting selling pressure will force the stock price to fall.
– one might be tempted to take the other side of this trade and sell the shares; However, it is extremely risky to sell short because the stock price no longer bears any connection to the long-term underlying value of the company. Remember the old saying in trading: “The market can remain irrational for longer than you can still be able to fulfill.”