The Meme Stock Phenomenon: When Social Media Dominates the Stock Market
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
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Ever heard of meme stocks? They are not a joke, but their rise is indeed driven by online communities rather than traditional supply & demand.
In recent years, the financial world has been rocked by one phenomenon: meme stocks. These are shares of companies whose market prices skyrocket not because of the company's performance or profits (that is, traditional financial fundamentals). Instead, it happens purely because of mass discussion and 'hype' on social media.
When a large group of these investors simultaneously decide to buy the same stock, it triggers extreme volatility. This causes the share price to move far from the company's actual value.
This phenomenon proves that united retail investors now have power. They are capable of disrupting a market that was previously dominated by massive financial institutions.
Imagine an internet meme—a funny image or idea that suddenly goes viral—but this time, it happens to stocks. Meme stocks become popular rapidly. Specifically, this occurs among retail investors (ordinary individual investors, not professionals) through community platforms such as Reddit (particularly the r/WallStreetBets subreddit), X (formerly Twitter), and TikTok.
Most of the famous meme stock dramas revolve around a strategy called short squeeze. In this strategy, retail investors buy shares en masse to force large investors (hedge funds) who have short sold the stock to buy back shares at a much higher price to avoid even greater losses.
This forced buying increases demand drastically, causing the share price to shoot up like a rocket.
The GameStop (GME) saga in early 2021 remains the most iconic example of the meme stock phenomenon. This video game retailer was viewed by large investors as a declining business. It had been targeted by hedge funds for short selling.
However, the online community on Reddit saw this as an opportunity. Led by analyst Keith Gill (known as "Roaring Kitty"), retail investors united to buy GME shares on a massive scale.
This collective action triggered a short squeeze that caused GME's price to surge from the low teens to nearly $483 within weeks (before stock split adjustments). This price increase resulted in billions of dollars in losses for major hedge funds. It simultaneously became a symbol of the retail investor 'rebellion' against Wall Street.
GameStop's price rose from USD17 to USD483 per share, turning early investors into instant millionaires.
For example, anyone who bought 1,000 units at USD17 and sold at USD483 would have pocketed more than RM2 million in profit.
One of the most well-known investors, Keith Gill (Roaring Kitty), reportedly earned more than USD30 million at the price peak.
However, not everyone was so fortunate — many retail investors who entered late ended up suffering heavy losses when the price plummeted back below USD100 just days later.
Hedge funds like Melvin Capital lost more than USD6.8 billion and were ultimately forced to shut down.
The massive GameStop phenomenon was immortalised in the 2023 Hollywood film, Dumb Money.
The film retells the events of January 2021 from the perspectives of various parties—particularly ordinary retail investors, dubbed 'dumb money' by financial institutions, and the hedge funds that fell victim to the short squeeze.
Dumb Money highlights how Keith Gill's passion and enthusiasm, combined with the online community's desire to fight back against big investors, sparked a historic market movement.
The film does not merely tell stories of profits and losses. It also shines a light on the power of social media in democratising and disrupting the modern investment landscape.
Although meme stock success stories sound enticing—supposedly making massive profits in the blink of an eye—you need to realise: This is highly speculative and extremely risky investing.
Prices that surge suddenly can crash just as quickly. Investment decisions are often driven by FOMO (Fear of Missing Out) rather than rational financial analysis. Moreover, most are not backed by solid business value. Meme stocks are better regarded as 'bets' or speculation.
If you want to try, make sure you only use money you can afford to lose. Never sacrifice your long-term investments or emergency savings.
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Meme stocks are shares that surge not because of a company's performance, but due to social media influence and collective retail investor movements. They are more speculative in nature compared to traditional investments.
The main risk is that meme stock prices are highly volatile and driven by FOMO, not financial analysis. Investors can suffer massive losses when social media momentum fades.
Meme stocks are not suitable for beginners as they require a high understanding of risk. Beginners are advised to start with fundamentally strong stocks and only use surplus money for speculation.
Platforms like Reddit and TikTok enable retail investors to gather and move share prices collectively, creating a new phenomenon where viral sentiment can overpower fundamental analysis.
The meme stock phenomenon shows how important investment knowledge is before diving into the stock market.
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