Robinhood CEO grilled at GameStop hearing
House lawmakers grilled the CEO of Robinhood Markets, Inc. as they examined whether the recent wild swings in the price of GameStop exposed conflicts in the market’s structure that can hurt unsophisticated investors. (Feb. 18)
- AMTD Digital is the newest meme stock
- Meme stocks were the craze during the pandemic as individual traders with lots of time on their hands jumped online and into stocks en masse.
- They discovered that. together, they could drive up stock prices and squeeze out hedge funds to push shares to extraordinary heights.
21,426% – that’s how much AMTD Digital stock, traded under the ticker symbol “HKD”, is up since its July 15 IPO. Put differently, if you bought just one share of AMTD Digital at its $7.80 a share IPO price and sold it at Tuesday,’s closing price, up 184% for the day, you would’ve made $1,671.
Shares of AMTD Digital’s parent company, AMTD Idea Group, a Chinese financial company traded under the ticker symbol “AMTD”, are up 525% over the past month and closed a whopping 238% higher on Tuesday.
But if you aren’t active on FinTwit, shorthand for financial Twitter where users tweet about investment moves they’re making or Reddit’s famous Wallstreetbets forum you’ve probably never heard of them.
In which case, welcome back to meme stock mania.
APDN stock versus HKD and AMTD
AMTD Digital and its parent company weren’t the only stocks to experience enormous gains on Tuesday.
Applied DNA Sciences Inc, which is listed on the Nasdaq under the ticker symbol “APDN”, closed 311% higher on Tuesday. The company announced that it initiated validation of its monkeypox virus polymerase chain reaction, or P.C.R., test. If validated it will submit its test for approval to the New York State Department of Health.
A state of emergency was recently declared in New York as monkeypox cases soared to 1,400. Currently, there are only five approved commercial labs that test for monkeypox contributing to major time lags for results. So having another commercial lab test for monkeypox could be a gamechanger, hence why the stock surged on Tuesday.
Monkeypox cases in each state: California, New York declare emergencies as outbreak grows
However, there weren’t any recent major news announcements that help explain why AMTD Digital and AMTD Idea share prices are exploding.
“To our knowledge, there are no material circumstances, events nor other matters relating to our Company’s business and operating activities since the IPO date,” AMTD Digital said in a Tuesday statement where it thanked investors for its “price performance.”
And that’s why they fit perfectly under the meme stock definition.
What are meme stocks?
Meme stocks, born during the pandemic in 2020, are what you get when you combine social media and stock investing.
People, largely stuck at home and bored with little to spend their stimulus checks on, decided to pass time and dabble in the surging stock market, especially since trading was free on Robinhood’s platform. These investors, many of whom probably had little experience in financial markets, scoured social media – places like Twitter, Stocktwits, Facebook, and Reddit – for ideas.
Once there, they found a bevy of people just like themselves and a pot full of investment ideas. As they discussed among themselves, certain ideas caught on. RoaringKitty (aka Keith Gill) had been touting GameStop shares on Reddit as well as in YouTube videos since 2019. During the pandemic, his musings garnered more and more attention from these new, bored, stuck-at-home investors and by 2021, a revolution in trading had begun.
What happened with GameStop?
Interest in GameStop considered the first meme stock, gathered momentum among individual, or retail, investors online. The stock was heavily sold short by hedge funds, trading significantly below what people thought the stock should be worth, and former Chewy CEO Ryan Cohen joined the board, which some thought could lead to a successful business turnaround.
SOCIAL MEDIA ADVICE: Gen Z turns to TikTok, Instagram for personal finance advice despite misleading investment tips
FUN AND GAMES: Apps make trading stocks feel like a game, but that may not be a winning investment strategy
That narrative led investors to band together to buy GameStop shares, which quickly sent prices higher and hedge funds scrambling to buy shares to cover their earlier sales (called short-covering), causing prices to skyrocket.
Online investors doubled down on their bets, and trading became extremely volatile with wide swings from hour to hour. Some trading platforms, like Robinhood and Schwab, halted trading in those names for their customers, which set off a string of losses – first by hedge funds and then by retail traders – investigations and congressional hearings on who was to blame.
What other meme stocks emerged?
After GameStop, emboldened online retail traders found new stocks like AMC and Bed Bath and Beyond to make viral on social media. Those stocks saw similar rollercoaster trading as online investors employed the same playbook. They gathered online to plot their collective buying spree, which would cause an initial price surge. That price increase would for Wall Street investors to have to buy stock to cover their short positions, which further bolstered the stock’s price and made the retail investors profit as hedge funds lost money.
SLOWER TIMES: Robinhood tumbles as growth in the summer slowed while trading calmed
LESSONS LEARNED: 3 things all investors can learn from meme stocks like GameStop, AMC and Dogecoin
This was a turning point in trading. Retail investors saw themselves as the little guys, beating back Wall Street suits and their algorithms, and a revolution was born. Wall Street was forced to take notice, and companies like VandaTrack started collecting data to analyze where the retail crowd was putting their money.
Medora Lee and Elisabeth Buchwald are personal finance and market reporters at USA TODAY.
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