Tag: Meme

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Investing in AMC, meme shares can really feel like a recreation. The best way to not lose

Investing in AMC, meme stocks can feel like a game. How to not lose

Mario Tama | Getty Images

AMC Entertainment stock continued its wild ride on Wednesday, with the price per share rising more than 100% and suspending trading multiple times.

AMC is one of several so-called meme stocks that, along with names like GameStop and BlackBerry, have seen strong interest from retail investors this year.

Financial advisors often warn against getting involved in such frenzies. But in a recent survey, 34% of consultants admitted their clients bought GameStop, while 20% of them bought the stock themselves, according to the Journal of Financial Planning and the Financial Planning Association.

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For retail investors, the challenge can be to place bets alongside professional investors such as short sellers, whose activity can also trigger large movements.

“Often you hear the narrative that they are only retailers, but that is not the case,” wrote JJ Kinahan, chief marketing strategist at TD Ameritrade, in a recent market update.

“The high volume suggests that there are a lot of big companies out there,” he said.

For example, the distressed investment firm Mudrick Capital bought and sold 8.5 million AMC shares on Tuesday.

Understandably, investors can get so caught up in profits that they forget to remember the potential to lose.

If you want to try your hand at meme stock names, it’s important to remember that you are really playing a game like musical chairs and behaving accordingly, according to Dan Egan, vice president of behavioral finance and investing at Betterment.

“Half of the game is figuring out how to sell before it crashes,” said Egan.

Be ready to lose money

When you pay for a ticket to a sporting event, you part with an amount of money but can still watch the game.

Investors in meme stocks should start with the same approach, Egan said.

When investing in a stock like AMC you should have some level of composure because it’s fun, and if you’re losing money that’s fine, Egan said.

Plan an exit strategy

Before or while investing in a stock, it is also beneficial to identify when you would sell it in advance.

And be sure you keep that promise, said Egan.

“What often happens to people emotionally is they hit that price point, but then they ask, ‘Wait, what if it goes higher?'” Egan said.

Anyone considering trading these should be aware of how volatile they can be.

JJ Kinahan

Chief Marketing Strategist at TD Ameritrade

To avoid this, it is beneficial to set up a way for the transaction to be carried out automatically so that your emotions are not disturbed in the moment.

“Anyone considering trading these should be aware of how volatile they can be and be prepared to be disciplined about the levels they want to get in and out of,” Kinahan said of stocks like AMC or GameStop.

Avoid a team mentality

It can be exciting to be part of an investment where your activity adds to price movement and you can empathize with fellow investors on message boards.

“The community aspect, the social aspect of it, is a really tough drug that you can try to get off of,” Egan said.

Additionally, this can prevent you from selling the stock, which would mean that you are no longer part of a team or movement.

It’s important to remember that you still need to put yourself first.

“Movement leaders won’t tell you until they sell,” Egan said.

Balance again along the way

Because of the wild swings trending stocks experience, your initial allotment could go from 5% to 20% of your portfolio while you’re not careful.

Try to rebalance if your position reaches sizes you wouldn’t have invested in, Egan said.

It’s also important to remember that stocks that have performed well will continue to fall and have more potential to lose, he said.

One way to keep making the headlines without as much risk is to put your money in investments like diversified exchange-traded funds instead, Egan said.

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Meme inventory AMC extends rally, jumps 17% as theater chain sells new shares

Meme stock AMC extends rally, jumps 17% as theater chain sells new shares

Shares of AMC Entertainment surged again Tuesday after the theater chain sold more than 8 million shares to an investment firm, the latest in a series of capital raises for the struggling company turned meme stock.

AMC said in a securities filing that it raised $230.5 million through a stock sale to Mudrick Capital Management. The theater company said it would use the funds for potential acquisitions, upgrading its theaters and deleveraging its balance sheet.

Shares were up 17% in premarket trading.

AMC’s business was effectively halted during the pandemic, with movie theaters shut in most of the country for months and major studios delaying releases during the pandemic. However, the stock became a favorite of traders on Reddit and has seen wild swings in recent months.

The shares doubled last week on incredibly high volume as the speculative activity by retail traders driven by the message board ramped back up once again.

The company has taken advantage of those price surges by selling additional shares to raise cash. The stock is up more than 1,000% year to date.

“Given that AMC is raising hundreds of millions of dollars, this is an extremely positive result for our shareholders,” said AMC CEO and President Adam Aron in a filing. “It was achieved through the issuance of only 8.5 million shares, representing less than 1.7% of our issued share capital and only a small portion of our typical daily trading volume.”

AMC has around $5 billion in debt and needed to defer $450 million in lease repayments as its revenue largely dried up during the ongoing coronavirus pandemic. Theaters were closed for several months to help stop the spread of the virus, and when the company reopened its doors, few consumers felt comfortable attending screenings, and movie studios held back new releases.

Now, as vaccination rates continue to rise and the number of coronavirus cases decline, consumer confidence in returning to movie theaters has spiked. Not to mention, studios are finally releasing new content.

Over the weekend, John Krasinski’s “A Quiet Place Part II,” the sequel to his 2018 blockbuster, garnered $48.4 million over Friday, Saturday and Sunday, the highest three-day haul of any film release during the pandemic.

For the full four-day Memorial Day weekend, the North American box office tallied nearly $100 million in ticket sales.

Still, while initial box-office receipts are promising, fundamental elements of the movie theater business have changed in the last year, including theater capacity, shared release dates with streaming services and the number of days that movies play in theaters.

The securities filing from AMC, which closed Friday with a $11.8 billion market cap, also has a risk warning for investors: “Our market capitalization, as implied by various trading prices, currently reflects valuations that diverge significantly from those seen prior to recent volatility and that are significantly higher than our market capitalization immediately prior to the COVID-19 pandemic, and to the extent these valuations reflect trading dynamics unrelated to our financial performance or prospects, purchasers of our Class A common stock could incur substantial losses if there are declines in market prices driven by a return to earlier valuations.”

—With reporting by Sarah Whitten.

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Meme Shares and Archegos: Fed Calls Out Monetary Weak Spots

Meme Stocks and Archegos: Fed Calls Out Financial Weak Spots

The Federal Reserve warned of the financial stability risks posed by foamy stocks and debt-laden hedge fund betting in its bi-annual report on potential vulnerabilities in the system, and pointed to the surge in so-called meme stocks as a sign of risk-taking spiraling out of control .

The central bank’s financial stability report released on Thursday followed an unusual six-month period for the markets. During that period, stocks rose steadily as the US economic outlook rebounded and stories of surpluses surfaced.

Internet roundtables helped spark interest in stocks like GameStop, a cryptocurrency created as a hoax, and a little-known hedge fund melted down. These stories have made headlines, causing many – including obviously some at the Fed – to wonder if the financial system was headed for trouble.

“The security vulnerabilities associated with an increased risk appetite are increasing,” said Lael Brainard, a Fed governor, in a statement on the Fed’s release. Stock prices are high compared to earnings, and “risk-taking has risen sharply, as the” Meme Stock “episode demonstrated.”

The Fed’s new report painted a generally sunny picture with banks, consumers and businesses weathering the coronavirus shock in reasonable financial shape, and it said that some measures made risk appetite look typical.

However, the report found that some asset prices “may be susceptible to significant declines should appetite decline” and that “high volume and price volatility episodes for so-called meme stocks” are among the signs of “increased appetite for risk.” Stock markets “belong. Officials also selected hedge funds, saying the opaque investment vehicles had slightly higher than normal leverage, while warning that the data available on funds “may not capture major risks”.

The report, which took on a threatening tone at times, contrasted with the picture Fed officials, economists and investors alike have painted of the U.S. economy, which is expected to recover rapidly from the spread of coronavirus vaccines. It was emphasized that increasing consumer and business confidence can fuel risky bets and create or expand weaknesses in the financial markets.

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Updated

May 7, 2021, 11:56 p.m. ET

The Fed’s suggestion that more data be needed on hedge fund debt followed an episode in March when banks were having trouble at a large fund, Archegos Capital Management. The fund had amassed large, leveraged stock bets that went bad and cost the banks with which it had done business.

“While broader market spillovers appeared limited, the episode shows the potential for material hardship” in non-bank financial firms “to” affect the broader financial system, “the Fed said in its report. The opacity of hedge funds was also said to have raised questions during the meme stock episode: some funds that had wagered against the stocks in question suffered losses when chatboard vigilants poured into them.

The answer to both episodes, which Fed and Ms. Brainard seemed to suggest, starts with better data.

“Archegos’ event highlights the limited visibility of hedge fund exposure and is a reminder that the measures available to leverage hedge funds may not capture key risks,” said Brainard. She added that the episode “underscores the importance of more detailed, more frequent disclosures”.

And while bubbles were high on the list of concerns, the Fed believed that underlying economic risks remained that could disrupt financial markets.

The coronavirus pandemic, which is under control in the US but continues to rage across much of the world, continues to pose risks to the system.

“Despite significant advances in vaccination, the perceived risks associated with the progression of the pandemic and its impact on the US and overseas economies remain relatively high,” the report said. “A worsening global pandemic could put a strain on the financial system in emerging economies and some European countries.”

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Business

The Week in Enterprise: The Meme Inventory Bubble Bursts

The Week in Business: The Meme Stock Bubble Bursts

Happy Super Bowl Sunday. Here are the key business stories for the week ahead. – Charlotte Cowles

27 years after founding Amazon, Jeff Bezos is handing over his job as managing director to one of his protégés, Andy Jassy, ​​who heads the company’s lucrative cloud computing department. Mr Bezos becomes the CEO of Amazon and participates in high-level decision-making, but it is still the end of an era for the largest e-commerce retailer in the country. He walks away on pretty good marks: Amazon’s most recent quarterly revenue topped $ 100 billion for the first time, and the company’s worth ($ 1.7 trillion) has Mr. Bezos one of the richest people in the world made. However, we face challenges as the company is increasingly scrutinized by lawmakers and antitrust authorities to determine whether it is exercising its influence illegally.

Well, here’s something unsurprising: shares of GameStop – the company that sparked an online stock buying frenzy that upset the markets – fell back to earth, falling to a tiny fraction of what they were a few days earlier had held. The same army of retail investors that fueled GameStop’s boom-and-bust cycle had also snapped up stocks of underdogs like AMC Entertainment and BlackBerry, whose prices also crashed last week. The rapid devaluation of so-called meme stocks, named for their popularity on social media, has led investors to wonder who to blame for their losses. However, when the market stabilized it had its biggest rally in months.

Will the GameStop saga change the regulation of stock trading? Maybe. Recently confirmed Treasury Secretary Janet Yellen held a meeting with senior regulators on Thursday to discuss the increasing prevalence of retail investing – stock trading made easy (and free) with apps like Robinhood and E-Trade. The advantage of these platforms is that they make investing more accessible to ordinary (read: not Wall Street) people. If the past few weeks have taught us anything, the whims of these individual stock traders can also create volatility that harms investors of all kinds.

The Biden administration and the Democrats in Congress are calling for their sweeping coronavirus relief bill of $ 1.9 trillion and will work out the final details this week. In order to avoid possible deadlocks, the Senate Democrats have passed a budget framework that allows the aid package to be passed with a simple majority and without Republican support. President Biden said he was still hoping to compromise with Republicans who had opposed the scope and price of the bill. But he’s unwilling to waste time soliciting their votes or focusing on cornerstones like school aid or direct payments of $ 1,400 to skilled Americans. And with the grim report on Jobs in January, there’s no moment to lose.

Voting technology company Smartmatic has filed a $ 2.7 billion defamation lawsuit against Fox News, three of its anchors, and attorneys Rudolph Giuliani and Sidney Powell. The company accuses the defendants of harming their business and reputation by spreading false theories about its services as part of their discredited allegations of widespread fraud in the 2020 elections. In its complaint, Smartmatic argues that Mr. Giuliani and Ms. Powell, who represented former President Donald J. Trump, “made a story about Smartmatic” and that “Fox joined the conspiracy to provide Smartmatic and its voting technology and software defame and belittle. ”

The cost of Super Bowl ads remained similar to the previous year – about $ 5.6 million for a 30-second commercial. It’s the first time the rate hasn’t increased significantly in over a decade, and it took CBS much longer than usual to sell all of the slots. It’s an odd time for marketing, after all, and advertisers face a dilemma: are you playing on the pandemic and reminding viewers of a nightmare they were hoping for a precious few hours? Or do you ignore it and risk looking numb? The ads are dominated by pandemic-popular companies such as the delivery service app DoorDash, the Mexican take-out chain Chipotle and the recently troubled investment platform Robinhood.

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Business

Robinhood Recaps Are a Meme for a Risky Yr

Robinhood Recaps Are a Meme for a Volatile Year

In 2020, wild fluctuations in stock markets caused by the pandemic turned millions of people into opportunistic investors. After stocks fell in March, veteran traders and Nasdaq newbies poured their dollars into buoyant tech companies like Tesla and Zoom, as well as companies hit by Covid restrictions, including airlines, restaurants and cruises.

To reflect a year of volatility and impulsive investing, Robinhood, the popular trading app that has created controversy by marketing it to the young, released a year-end data dump for its users. A press release promised that the Robinhood round-up will be “a special personalized experience that will guide you through your investment journey this year – from views on trades, your most memorable investing moments, big or small and other milestones along the way.”

Robinhood’s summary – available to anyone with an active account prior to December 15th – showed stocks bought, dividends and interest, which stocks in their portfolio they clicked the most, and other data.

Some people praised the abstract’s aesthetic and said they enjoyed figuring out how early they would adopt Robinhood. “We were thrilled to hear from many clients who enjoyed taking a peek at their investment year, from saving screenshots of their recaps to sharing them on social media,” a company spokesperson wrote in an email.

Robinhood is one of several popular consumer apps that include shareable, data-driven annual summary lists, like Spotify Wrapped, a round-up of the upbeat or appropriately depressing songs people heard in 2020, and Strava’s year in the sport that got the miles its users ran and cycled. These packages use upbeat language and engaging graphic design to encourage their users to share on social media.

But for most people, personal financial decisions are not as easy to share as, say, the most played artist of the year. They are private by nature.

Kareem Rahma, 34, a comedian and entrepreneur, wrote in an email that he “would never share this information publicly as it is much more sensitive than my listening habits on Spotify”.

Even so, many people posted screenshots of their round-up on social media. Many were impressed with the number of times they checked the price of certain stocks.

“Tesla has grown like crazy in general, and obviously its inventory has improved. So it was kind of weird how many times I apparently checked it,” said Eric Milligan, an information technologist.

The 29-year-old Jordan Bishop was also surprised by this slide in his summary. “Before you know it, you’ve checked it 10 times a day and it gives you a little dopamine boost each time,” he said.

“Robinhood Wrap made me realize that I was very obsessed with every dollar up or down in the market and it was just very unhealthy,” wrote Rajat Kamboj, a 20-year-old student, in an email. His recap told him that he had checked the value of his Tesla stock 18,656 times in 2020, averaging more than 50 times a day. (“They’re just a little connected,” was his summary.)

“As a self-directed brokerage company, we do not give investment advice,” a Robinhood spokesman said in a statement. “The goal of Robinhood Recap was to celebrate milestones and give people a broader view of their activities over the year so they can shape their behavior over the long term.”

The round-up became a meme on the snappy finance-focused subreddit WallStreetBets; A user created a parody version of a repeat item that revealed extensive losses. (“You made some risky calls …”)

“This year has seen an unprecedented surge in retail investment,” the Robinhood spokesman wrote. “We have welcomed millions of new customers to Robinhood, approximately half of whom are first-time investments. With Robinhood Recap, we wanted to remind both new and long-time customers of their investment journey. “

Robinhood added three million users this year for a total of 13 million. The app has become a favorite of young and inexperienced investors, attracted by free trading, free stock offers, and an engaging user interface that uses a July New York Times report dubbed the Silicon Valley Playbook of Behavioral Nudges and Push “Means notifications. “

The Times article states that Robinhood users trade risky products faster than clients of large brokerage firms. For example, Robinhood users bought and sold 88 times as many risky options contracts as Charles Schwab’s clients.

Several people said the round-up seems to fit into the company’s broader strategy of positioning itself as a lifestyle experience rather than just another boring trading platform to appeal to less sophisticated investors.

“Their bright and colorful user interface, easy access to margin accounts and options, and Robinhood Recap give me the idea that they are trying to appeal to younger people,” wrote Luke Thornburg, 19, in an email . “These younger people, who are generally inexperienced and more risk tolerant, might choose Robinhood because of these things.” He said that he lost money trading risky options when he first used the app.

“Spotify seems to be a clear comparison there,” said Bishop, the founder of a personal finance website that focuses on air travel. “I just find it fascinating and a little dangerous how personal finance and social media converge in this way.”

Gina Fuchs, 24, a community coordinator for a not-for-profit coding camp for young women, wrote in an email: “The app does a great job of making it accessible to small traders or people who dip their toes into the world of stocks (I!). and because of this, it is attractive to millennials. If the data had been captured more creatively, this would have been an interesting feature for them. “

While this year has been good for Robinhood from a business standpoint – a $ 200 million round of funding in August raised its valuation from $ 8.6 billion to $ 11.2 billion – the company has also been an intense one Subject to scrutiny of its practices.

After a 20-year-old user killed himself in June after mistakenly believing he had a negative $ 730,000 balance on the app, Robinhood faced a round of critical press about the app’s appeal to youngsters , inexperienced investors turned.

Last week, the Securities and Exchange Commission accused the company of “misleading customers about sources of revenue” and citing “repeated misrepresentation of failure to disclose receipt of payments from trading companies for forwarding customer orders to them.” Robinhood agreed to pay a $ 65 million fine. And on Wednesday, Bloomberg News reported that a complaint filed in San Francisco against Robinhood Financial could become a class action lawsuit.

“The deal relates to historical practices that do not reflect Robinhood today,” said Dan Gallagher, Robinhood’s chief legal officer, in a statement. “We recognize the responsibility that comes with helping millions of investors make their first investments and we are determined to continue developing Robinhood as we grow to meet our clients’ needs.”

Brett Robinson, a 28-year-old who works in film development, saw abstract as a cultural artifact of late capitalism. “It accidentally reminded me of the truism ‘if something is free, you are the product,'” he wrote in an email. “Of course, Robinhood is more interested in our involvement than in my piddly return.”