Shoppers wait for a GameStop store to open at Tysons Corner Center, in Tysons, Virginia, November 27, 2020.
Hannah McKay | Reuters
An army of traders on Reddit, triple-digit stocks and a $100 million junk shop: In a year of massive trading, the unexpected has become the norm in the stock market. securities in 2021.
This year’s activity coincides with a the rise of rookie investors who entered the world of stock trading to drive the historic rally of the market. Teleworking, stimulus checks and higher personal savings, as well as social chat rooms, have only fueled a boom in the retail business.
“If there was any doubt about who was in power in the stock market, the U.S. retail investor stole the show in 2015,” said Tony Pasquariello, global head of hedge fund insurance at Goldman Sachs. 2021”. “After a year that saw more capital inflows than 25 years ago combined, to what extent this cohort will continue to fight is a big open question for early 2022.”
Stock Meme Shocks Wall Street
The stock meme saga begins just days in 2021 when retail traders team up on Reddit’s WallStreetBets forum, aiming to boost prices. GameStopshares of, that is much underfunded by hedge funds. Retail purchases are activated large short coverage among hedge funds fueled the rally further.
Trading volume for GameStop and favorite AMC Entertainment meme stock has dwindled. According to FactSet, about 2.5 million shares of GameStop are changing hands daily based on a 30-day average through December 22, one-fifth from January.
Traders on Reddit are also less focused on GameStop and AMC, the two most talked about tokens on WallStreetBets this year, according to data tracking firm YoloStocks.
WallStreetBets mentions for both peaked on January 28 at around 267,000 for GameStop and 47,000 for AMC, but typical dates over the past few months have had hundreds, not thousands, of mentions.
Despite the recent market sell-off with GameStop and AMC, each down to their lowest level In the last month, both stocks are up this year, about 716% and 1,260%, respectively.
Performance varies for other stocks popular on the Reddit message board. BlackBerry is up 40% for the year, while Tesla is up 48%. Clover Health and Bed Bath & Beyond are down about 75% and 13% respectively in 2021.
A $100 million deli
While the meme stock craze turned around this year, perhaps the strangest investing phenomenon was the tiny New Jersey junk food store that once had a market capitalization of more than $100 million.
Hometown International, with headquarters in Paulsboro, Your Hometown Deli, with headquarters in New Jersey as its sole location, recorded a staggering market value earlier this year amid frenetic trading. Junk food only $35,748 in sales over the past two years combined, according to securities filings.
Hedge fund manager David Einhorn highlighted the snack as an example of the speculative trading activity back then.
“Someone pointed us to Hometown International (HWIN), which owns a snack shop in rural New Jersey… HWIN hit a market cap of $113 million on Feb. The largest shareholder is also the CEO / CFO / Treasurer and Director, who also happens to be The wrestling coach of the high school next door to the grocery store. Pastrami must be great,” Einhorn said in a letter to the customer in April.
SPAC Explosion
2021 is also the year of SPAC.
According to data from SPAC Research, funds raised through U.S. special-purpose acquisition companies hit a record $162 billion in 2021, double the $83.4 billion issued in 2019. last year, according to data from SPAC Research.
SPACs raise capital in an initial public offering and use the cash to merge with a private company and take it public, usually within two years.
The market is red hot in the first quarter with new transactions recorded average increase of 6.5% in the first day. Representative small time investors 46% trading volume in SPAC on the Bank of America platform in January.
Now, the industry has cooled off amid a myriad of challenges, from regulatory pressure to the prospect of higher interest rates and an increasingly competitive deal environment.
However, a specific deal announced in the fourth quarter has attracted a lot of attention. Digital World Acquisition Corp. announced in October that it would bring the former President Donald Trumpplan of public social media platform. News caused a 800% in two days of protests in stock, and SPAC is still up more than 400% for the year.
Renowned investor Chamath Palihapitiya said in October on his podcast “All-In with Chamath, Jason, Sacks & Friedberg“Digital World Acquisition it’s” an exchange-traded NFT by Donald Trump. “
Note: FactSet is the data source for the graphic at the beginning of this story and current information as of the market close on December 22.
