GameStop, AMC Drag Meme Stock Group to 7-Month Low

(Bloomberg) -- Losses for a basket of so-called meme stocks are mounting, with traders shifting away from riskier assets in the final weeks of the year. 

The group of 37 retail trading favorites tracked by Bloomberg extended losses to 5.5% on Monday, as selling pressure for markets around the globe accelerated. The index has shed almost a quarter of its value over the past three weeks as it slides to the lowest level in seven months.

Risky assets and high-flying tech companies have been under pressure since worries surrounding the omicron coronavirus strain began to bubble and as traders attempt to gauge the Federal Reserve’s next moves. The volatility for meme stocks is nothing new as massive rallies and rapid selloffs for the group is the status quo.

“For SPACs and meme stocks, my sense is FOMO was a big driver,” said Mike Bailey, director of research at FBB Capital Partners, referring to the fear of missing out mentality that drove trading at times in 2021. “Now reality is sinking in and investor sentiment is shifting to fear and downside risk, rather than greed and upside potential.”

To be sure, despite the recent volatility and pain meme stocks have delivered eye-popping gains. AMC Entertainment is up almost 1,000% this year and GameStop shares have rallied 620% -- outperforming the group’s 44% rise.

But recent pain has been apparent for blank-check companies and the firms they lead to the public market as well. The IPOX SPAC Index, a balanced mix of 50 SPACs and De-Spacs, fell 1.4% Monday, bringing losses for the past three weeks to 9%. The index is down almost 16% so far this year.

Dip-Buying

GameStop Corp. and AMC Entertainment Holdings Inc., the two best-known meme stocks, have been the biggest drags on the group since mid-November. Each is down close to 45% in the past three weeks, while Express Inc., Newegg Commerce Inc. and Bed Bath & Beyond Inc. have shed more than 30% of their value.|

Grapevine, Texas-based GameStop is down 21% since Wednesday, when it reported a wider-than-expected loss in the third-quarter and as details on its turnaround underwhelmed investors. AMC Entertainment has been caught in a selloff alongside reopening-trade stocks and as key executives sold shares. 

Retail traders on Fidelity’s platform rushed to buy shares of AMC Entertainment after the 18% dip and GameStop’s 14% drop on Monday. The pair were among the five most-bought stocks by Fidelity’s customers, with buy orders far outpacing sell orders.

©2021 Bloomberg L.P.