- Some meme stocks have raised monies through stock sales and debt issuances that could provide them the necessary resources to stage dramatic turnarounds
- Excess short seller activity may yet re-ignite the flames of retail investors looking to perform just one more short squeeze for the road
Given the volatility in risk assets of late, investors could be forgiven for assuming that the darling of risk-taking – meme stocks – should be all but dead by now.
But these investors would be mistaken in their assumption.
While battered investor sentiment has beaten-down meme stocks, solid economic and earnings growth could give them a second lease of life.
Let’s not forget that meme stocks from the likes of movie theater operator AMC Entertainment to video game retailer GameStop, were able to not just sell their shares at ridiculous prices, they also used the opportunity to line their pockets with cheap debt to sustain comebacks.
Take Hertz for instance, a car rental giant that filed for Chapter 11 bankruptcy protection and was assumed to be left for dead when a stunning revival and now a mega deal with Tesla to rent out electric vehicles has seen a swift reversal of fortune.
Many stocks that peaked early last year amid a retail-trading frenzy are significantly far off their highs as concerns grow about the impact of U.S. Federal Reserve rate hikes and inflation.
Consumer sentiment is also turning sour and a gauge of retail investor favorites from Nomura Holdings and Wolfe Research has slumped over 30% from a high last November.
Overall, stocks once popular with retail investors, have fallen into a bear market, and it’s unclear how long it will take for them to turnaround, if ever.
The situation for meme stocks has deteriorated so much that short sellers who once tried to obfuscate their bearish positions are calling open season on target companies, without fear of retaliation from retail investors.
Even if these meme stocks manage to turn their fortunes around, it isn’t clear that they will reach their previous glory, but writing them off completely as going concerns on the other hand, may be premature.
