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Where the 'meme stock' phenomenon stands, 2 and a half years after the GameStop craze

MARY LOUISE KELLY, HOST:

Meme stocks are getting the Hollywood treatment. The new movie "Dumb Money" is about the GameStop craze in 2021 when amateur traders banded together on the social media site Reddit to give professional investors a run for their money. As NPR's David Gura reports, the meme stock phenomenon lives on.

DAVID GURA, BYLINE: It's a remarkable David and Goliath story that played out in the middle of the pandemic.

(SOUNDBITE OF FILM, "DUMB MONEY")

UNIDENTIFIED NARRATOR: When Wall Street rigged the system...

SETH ROGEN: (As Gabe Plotkin) Stupidest people on earth.

VINCENT D'ONOFRIO: (As Steve Cohen) Dumb money, man.

ROGEN: (As Gabe Plotkin) Happy to take it.

UNIDENTIFIED NARRATOR: ...These ordinary people risked it all.

UNIDENTIFIED ACTOR: (As character) GameStop?

GURA: Two and a half years ago, the video game retailer GameStop was floundering, and hedge funds were betting it would continue to flounder when members of this finance-focused Reddit community called r/wallstreetbets decided to do something about it. They piled into GameStop stock. They drove up its price, and that made it very painful for those professional investors who wagered it would tank. Sean Kumar says he considers that frenzied period a defining moment in his life.

SEAN KUMAR: It was a very stressful but a very exciting time.

GURA: It was also a unique time which led many pundits to suggest the GameStop craze would be a one-off. People were stuck at home during a global pandemic with time on their hands. Kumar was a college student waiting for his final semester to start online. He'd followed the r/wallstreetbets message board since high school, and the uptick in chatter about GameStop caught his attention. He bought video games there when he was a kid.

KUMAR: I made a mental note that, OK, I should keep an eye on this and think more about what could happen here.

GURA: What motivated Kumar and other amateur traders was this sense that maybe the power dynamic was changing between Wall Street and mom-and-pop investors. It was also an opportunity - albeit a high-risk opportunity - to make a lot of money.

KUMAR: I knew that it would be something that - it would burn twice as bright, but it would burn twice as hot as well.

GURA: Among the millions of us watching this play out was Albert Choi. He's a professor of corporate and securities law at the University of Michigan.

ALBERT CHOI: I mean, I thought that at that point in time - back in 2021, I thought that this was just another fluke.

GURA: That it was just another bubble artificially inflated by demand. But then it started to spread to other stocks - to Bed Bath & Beyond, to BlackBerry and AMC, and more recently to regional banks, exacerbating the turmoil in that sector. None of it makes much sense, and traders have faced some painful losses. Tupperware has been another target. It's been struggling. And the trucking company Yellow became a meme stock when it was on the brink of bankruptcy.

CHOI: I think we'll be experiencing a lot more of these episodes going forward.

GURA: Choi is not surprised we're still seeing new meme stocks. Trading is easier than ever, and we've all seen the power of social media. But he's mystified by what companies attract attention on Reddit and other sites.

CHOI: There is going to be, I think, inherent uncertainty about which ones are going to be the next meme stock companies.

GURA: And although there was speculation back in 2021 this phenomenon could change the investment landscape, that hasn't happened according to Elisabeth de Fontenay. She teaches corporate finance at Duke Law. One reason is Wall Street has gotten a lot smarter about fighting back.

ELISABETH DE FONTENAY: Well, ironically, lots of hedge funds are trying to see if they can write algorithms that predict which company will be the next meme stock (laughter). So the hedge funds will actually benefit from the meme stock movement in the long run.

GURA: And there's not the same level of interest we saw in the early days, the same excitement. The lockdowns are over, and there's more to do. There's also more to spend money on. For Sean Kumar, the reward was worth the risk. He says he made about $35,000 off his GameStop investments, but after that, he decided to stop trading meme stocks.

KUMAR: I walked away completely. I sort of knew that this kind of hype trade, this kind of sort of frenzy was very much a - you get lucky, I think.

GURA: Kumar doesn't follow r/wallstreetbets anymore. Now he works for a financial services firm. David Gura, NPR News, New York. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.
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