Meme stocks: ‘A lot of people will lose a lot of money,’ Interactive Brokers founder says
It’s been roughly a year since GameStop (GME) began overtaking headlines and a ‘meme stock’ phenomenon was born. However speculative assets have been under pressure recently amid rising inflation and a more hawkish-toned Federal Reserve.
“I do hope that investors will refocus on fundamental values,” Thomas Peterffy, founder of Interactive Brokers told Yahoo Finance Live.
“This meme stock idea — it’s fun, but it’s not sustainable,” he continued.
“I think a lot of people will lose a lot of money on these meme stocks. It’s not good for the market, and it’s not good for the people,” said Peterffy.
Trading platforms like Interactive Brokers have seen an influx of retail investors during the pandemic as asset prices soared.
Shares of Robinhood (HOOD), the investing app seen as a proxy for retail investors, are down 21% year-to-date. The stock is trading at around the $15 level roughly six months after reaching an all-time intraday high of $85 per share in August.
Shares of AMC, one of the flagship meme names, are currently sitting below $20, a price not seen since May of last year. GameStop shares, at $105, are at levels similar to those in late February 2021.
Still, some apes on social media vow to hold onto the stocks. AMC is the second-most mentioned symbol ranked by Stockwits. The stock is also a top trade among Fidelity retail investors, with more Buy orders than Sell.
“The conditions were perfect,” for the GameStop phenomenon last year, Geoff Beers, host of the 40 Finance YouTube channel, told Yahoo Finance Live recently.
“I think that you’d have to say we’ll see it again at some point. But this year, I don’t know,” he said.
The rise of meme stocks last year came amid an influx of liquidity in the markets, stimulus from the government and lockdowns.
“We had the pandemic bottom, which was a great starting point for this type of activity. And I’m not sure that we’re going to see a huge bottom anytime over the next year,” he said.
The markets have been under pressure recently amid the prospects of tighter monetary policy in order to combat inflation. This often results in pressure on asset prices as liquidity is siphoned out of the markets.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre
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