Opinion: Meme stocks continue to tumble as retail investors digest so much news
Adam Aron may want to put down the popcorn, and Ryan Cohen might want to keep tweeting.
Shares in AMC Entertainment
closed down 6.9% on Friday, capping off a very rough week for the stock after reports that its memelord CEO sold another large tranche of his AMC shares and made the rare decision to disappoint his retail investor shareholders by publicly pouring cold water on a virally popular plan to protect the stock against short sellers.
AMC disclosed in an SEC filing Thursday afternoon that Aron and his CFO Sean Goodman recently sold 312,500 and 18,316 insider shares, respectively. All in, the two executives cashed out to the combined tune of just over $10 million.
This is Aron’s second major insider sale in as many months from which he looks to have pocketed more than $30 million. For his part, Goodman now holds zero active AMC shares.
For AMC “Apes” who have “HODLed” through the thick and thin of 2021, watching the senior executives get liquid from a stock they have rocket-fueled by more than 1,200% in 2021 prompted some soul searching on social media.
“Apes literally donating money to hedgies and shit C-suites,” posted one user on r/WallStreetBets.
“Dude is cashing out and leaving you guys the bag,” replied another.
Still, many others defended Aron’s share sales, reminding their fellow Apes that Aron told investors he would be selling shares for estate planning purposes during the company’s Nov 8 earnings call.
Not helping Aron’s case with the haters was his tweet from Thursday morning in which he attempted to quell a viral theory supported by financier Marc Cohodes that AMC should offer a tokenized NFT dividend that would keep short sellers from getting their hands on AMC shares.
“It is likely illegal, breaches our debt covenants and/or exposes AMC to huge litigation risk,” read part of Aron’s tweet. “We can’t do it.”
Aron’s cold shower was met with some frustration by many who had spent weeks backing the plan and caused some public Twitter drama between Cohodes and a Twitter influencer who had been working with him to publicize the plan.
It also caused AMC stock to fall by more than 10% at one point Friday and provided another glimpse in to the schism between Apes backing AMC and those loyal to the other Mother Meme stock.
“There is a huge difference between AMC and GME,” posted one user on r/WallStreetBets. “Only one of them had the potential for something amazing.”
And speaking of GameStop
it also plummeted by as much as 4.3% on Friday, continuing its slide after the company’s quarterly earnings report on Wednesday revealed a 30% revenue boost but a dramatically widening loss-per-share, once again giving retail investors a financial Rorschach test to decide how painful the videogame retailer’s e-commerce transformation will be versus how much they “like the stock.”
Throughout 2021, GameStop stock has bounced from post-earning dips as retail investors piled in to buy shares at what they bragged online were a discount provided by Wall Street hedge funds, but going into the last hour of trading on Friday, the stock was down more than 10% for the week.
Overall, the mood around memes was rather dismal.
Enter Ryan Cohen.
“I’m cooler online than in real life,” the activist investor turned GameStop chairman/retail investor folk hero tweeted at 2:55pm EST.
From the moment that tweet went up, GameStop shares soared 6.3% to close up 2% on the day and cauterized the company’s losses at 4.2% for the week.
It also speaks to the power that Cohen has in the GameStop movement, a stark contrast to the suddenly damaged armor worn by Aron.
DOJ gives Reddit an early Christmas present with probe into short selling
Retail investors were also hyped by a report that the US Department of Justice is investigating some short sellers.
And while it does not appear that DoJ is looking specifically at meme stocks or the short seller funds that retail investors hate the most, the probe is reportedly focused on how shorts engage with researchers and publicize their findings to influence the movement of stocks they are betting against, which is also of interest to retail investors.
But there was more than enough smoke this week to show that meme stock investors need to start getting very cautious about what’s coming down the pike in 2022.
Friday’s new inflation data alone shows that the Federal Reserve will have to hike interest rates in 2022 and start putting an end to the opioid-level addiction to cheap money that has gripped US markets for more than a decade.
That era has also created the perfect incubation for meme stocks, fostering the growth of zero-commission trading apps, the dark pools that support them, and the algorithmic trading that has turned the outsider sentiment of individual day traders into huge market insurrections.
Once the Fed starts tapering, it will get harder and harder for Ryan Cohen’s tweets to salvage a trading day.