Banking

Meme Stock Crash Costs Speculators $44.5 Billion

The meme stock rally was fun while it lasted. But it’s handing out an expensive lesson now that it’s falling apart more than the S&P 500 for now.




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A nearly monthlong slide in stocks is mercilessly pounding online Reddit traders’ favorites, like AMC Entertainment (AMC), GameStop (GME), Peloton Interactive (PTON) and the Donald Trump affiliated Digital World Acquisition (DWAC). Those are among the hardest hit, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. The analysis looks at the 25 most-popular stocks with meme traders plus those most highly shorted compiled by Solactive for the upcoming Solactive Roundhill Meme Stock ETF.

Some of the pain is brutal.

These 25 stocks, on average, are down 24% in just a month. And that adds up to a painful $44.5 billion loss on them in just four weeks. In comparison, the S&P 500 is under pressure, too, but it’s only down 2.4% in a month. It’s the first time many of the speculators playing these risky stocks, many with no fundamentals, have seen losses.

“We have many investors who don’t have real depth and experience in the markets right now and, using the analogy of going to a casino, the worst thing that can happen is that the first time you go, you win big,” said Eben Burr, president of $2.2 billion in assets advisory Toews. “Then you keep going back and may get reckless — you’re not as skilled as you believe and the house eventually wins. Meme stocks have to be seen as a very speculative move.”

Assessing Brutal Meme Stock Damage

Meme stock pain is reaching levels their fans haven’t seen before.

A custom market-cap weighted index of the 25 stocks topped out on Jan. 27. And since then it has collapsed more than 26%. Much of that pain has happened in just the last four weeks, with the index dropping more than 14% in that time.

Some of the individual stocks have done much more poorly. Peloton is the worst of them all, plunging 52% in just a month and falling 70% from the time meme stocks peaked. That loss alone cost investors $13 billion in just a month.

GameStop, too, is gobbling up speculators’ quarters fast. The original meme stock is down nearly 21% in a month, sucking more than $3.4 billion out of investors’ portfolios. And it lost more than half its value from the meme stock high.

And Digital World Acquisition wasn’t trading yet in January when meme stocks peaked. But it’s already lost a quarter of its value in just a month.

What’s Next For Meme Stocks Vs. The S&P 500?

Fans of meme stocks might point out they’re still up for the year. That’s true. But they’re lagging the S&P 500 now.

Take theater chain AMC Entertainment. It’s still up huge for the year and it’s even up 45% from the meme peak. But in just one month shares are down more than 28% to 29.01. That’s much worse than the S&P 500’s 2.4% drop in that time.

And that’s the point. Meme stocks are now lagging the market, even if you include gains from the start of the year. The index of the 25 meme stocks is now up just 6.7% for the year. Had you just bought the S&P 500, you’d be up much more than that — 24%. And that doesn’t even include the S&P 500’s 1.4% dividend yield. Investors generally do much better by following sound investing rules.

Now that’s a tough lesson to take.

Meme Stocks Are Crashing

All but two of the 25 top meme stocks dropped in the past month

Company Symbol 1-mo. % ch Market value change one month ($ billions)
Peloton Interactive (PTON) -51.6% -$12.8
fuboTV (FUBO) -48.1 -2.3
Upstart Holdings (UPST) -48.0 -11.6
Clover Health Investments (CLOV) -45.0 -1.3
Robinhood Markets (HOOD) -41.8 -13.3
DraftKings (DKNG) -39.4 -7.5
Beyond Meat (BYND) -38.2 -2.5
ContextLogic (WISH) -37.0 -1.2
SoFi Technologies (SOFI) -33.8 -6.0
Penn National Gaming (PENN) -34.0 -4.2
Marathon Digital Holdings (MARA) -35.6 -2.2
Digital World Acquisition (DWAC) -28.9 -0.7
AMC Entertainment Holdings (AMC) -28.9 -6.0
Virgin Galactic Holdings (SPCE) -27.9 -1.4
Rush Street Interactive (RSI) -24.6 -0.3
GameStop (GME) -21.0 -3.5
Cassava Sciences (SAVA) -19.1 -0.4
Tilray (TLRY) -17.6 -0.9
Best Buy (BBY) -15.4 -4.7
Sundial Growers (SNDL) -14.5 -0.2
Cleveland-Cliffs (CLF) -11.2 -1.2
Riot Blockchain (RIOT) -12.6 0.2
ZIM Integrated Shipping (ZIM) -1.1 0.1
Lucid Group (LCID) 29.3 18.7
Roblox (RBLX) 45.2 20.8
SPDR S&P 500 ETF (SPY) -2.4
Sources: IBD, S&P Global Market Intelligence

Follow Matt Krantz on Twitter @mattkrantz

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