A pandemic triggered category, Meme Stock is born when retailers discuss to pump while institutions are anticipating a fall. The nascent style seems to gain traction when microblogs on Twitter, Reddit or Quora creates an indistinct buzz.
The most interesting part is the hedge funds are afraid of cynical investors who dethroned fundamental concepts of investing. Even before the lousy trend kicked in hedge funds bear high quality risk and now the meme risk is has now got a ranking on the list. Being the devotee of the service and the product of the business, the retail investors convene against the deflating stock which is trying to reflect the exact quality of the business.
Meme investing has also meant that the risks of short selling have gone up multifold. Stock market has become handy and market has become operationally efficient because of technological advancements in the financial sphere. Hedge funds are loosely regulated and now they are indirectly scrutinized by retail investors who intentionally bid against the shorting positions of institutions.
Such stocks have seen huge gains in recent times, sometimes 50-100% in a day, which is impossible for a value investor even virtually. Mumbai Oxygen Finance, Game Stop, AMC stock were the trendsetters of meme investing and much more following. Meme ETFs has emerged to exploit the market inefficiency. The value created in a day will be destroyed in a day, and the hardest thing is to know the date.
Try to avoid them or ride on them well. Beware of offshore investing because of the time lag and when the news reaches the investor, the market would have reacted to it.