Why These Meme Stocks Are Tumbling When the Market Is Rising


What happened

Meme stocks are tumbling Wednesday, with shares of AMC Entertainment Holdings (NYSE:AMC) tumbling 9.5%, GameStop (NYSE:GME) down 9%, and Express (NYSE:EXPR) plunging 12.5% in morning trading.

While there was no company-specific news for any of the stocks to cause the decline, AMC announced yesterday it was withdrawing its 25 million share stock offering after investors balked at being diluted, while GameStop announced it was opening a new warehouse facility in Reno to help with its transformation into an online-oriented video game retailer.

Golden bull and bear on stock charts

Image source: Getty Images.

So what

Even with the pullback in stock prices, AMC, GameStop, and Express continue to trade at elevated levels. The theater owner is still up over 2,250% in 2021, GameStop is 960% higher, and the apparel retailer is up 540% so far this year.

Yet they all continue to have high levels of stock sold short with entertainment stocks AMC and GameStop having about 17% of their shares outstanding shorted while Express is at 12%. That’s partially why internet chatroom traders continue to advocate holding on or buying on the dip because they’re looking to engineer another short squeeze.

Unfortunately, it’s not likely to happen.

Now what

On all three stocks, the short interest ratio, or the number of days it would take for short sellers to cover their position, stands at one day or less. Because seven days or more is considered a lot and potentially what it would take to trigger a squeeze, the current count suggests nothing will happen.

READ:  https://www.fool.com/investing/2021/08/18/heres-the-top-hidden-tech-stock-gem-to-buy-now/

There may be reasons to buy shares of the three companies, but keeping the retail investor revolt going is not one of them.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.




View more information: https://www.fool.com/investing/2021/07/07/why-these-meme-stocks-are-tumbling-when-the-market/

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