Meme Stocks: To Meme or Not To Meme? August 13, 2021

Meme Stocks: To Meme or Not To Meme?

At a glance:

  • Meme stocks have been known to produce overnight millionaires out of mom-and-pop investors.
  • Meme investing, however, is extremely short-term and volatile, defying fundamental and technical analysis.
  • While their rise is fast and steep, their decline can be just as sharp and swift.

What are meme stocks?

GameStop’s short squeeze in January 2021 famously led to the birth of a whole new breed of stocks: meme stocks.

According to Wikipedia, meme is “an idea, behaviour or style that spreads by means of imitation from person to person within a culture and often carries symbolic meaning representing a particular phenomenon or theme.”[1]
How does that translate to stocks?

Meme stocks are stocks that have gone viral, creating a lot of buzz which attracts more and more retail investors into piling onto the bandwagon.
Their trading volume and share prices surge not because of anything the underlying companies do but because of the hype generated on social media like Twitter, Reddit and Tik Tok.

Their share prices often shoot through the roof but fall back to earth in a short span of time.

Because meme stocks are based on hype, they defy all fundamental and technical analysis. Due to their extreme unpredictability and volatility, they are shares at the very far end of the risk spectrum.

This high risk does not dampen their popularity. Meme stocks are still among the top US stocks traded on POEMS in the last few months.

Let us try to understand this baffling phenomenon.

David vs Goliath: Reddit vs Wall Street

Meme stocks were ushered in by the GameStop short squeeze in January 2021.

Back then, GameStop fans were riled by Wall Street hedgers’ attempt to profit from GameStop’s share-price decline by shorting its shares. An online rally on Reddit sought to prop up the price of GameStop artificially by a mass purchase of its shares in response to the opportunistic hedging. Tesla’s eccentric founder, Elon Musk, added fuel to the fire with a simple tweet – “Gamestonk!” – along with a link to the Reddit thread [5]. Its share price soon crossed the US$200 mark and continued to climb.

The price of GameStop shot up 1,500% over the course of the next two weeks. Its sudden spike caused its trading to be halted multiple times. [2]

Wall Street’s shorting was supposed to be the nail in the coffin for GameStop, whose brick-and-mortar video game stores were losing to digital competition during the pandemic. Instead, it became an opportunity for middle-class Americans to strike back at the big boys at Wall Street. [3]

Whereas retail traders could profit from rising share prices, the hedge funds which short-sell suffer, since they are betting that the share prices of the stocks will drop. When their prices start to rise, they have no choice but to cover their short positions by buying back shares to avoid loss. This mad scramble for shares is what creates a short squeeze.

From the GameStop saga, the public realised that it could democratise the stock market by communicating instantaneously with and gathering numerous small traders through social media to beat Wall Street at its own game. [4]

Relying on Reddit and Twitter, the Davids of America took on the Goliaths of Wall Street, who are used to making fat and quick profits through short-selling.
Inspired by GameStop, retail investors started placing their bets elsewhere, on AMC Entertainment, BlackBerry, Nokia and many more. And thus, meme stocks came into a class of their own.

They are now a symbol of the commonplace investor proving that together, they are a force to be reckoned with.

Social media

If we were to apply technical and fundamental analysis to meme shares, none of it would make any sense. Meme stocks can be in a dying industry, with all-time-low investor confidence. Their share prices are usually on a multi-year decline.

Fortuitously, social media has come to the rescue of such companies.

For the first time in investment history, retail investors are able to band on social media and influence stock prices, snatching power and control away from the hedge funds with much deeper pockets. Their call to arms has saved these meme stocks from complete oblivion.

Psychology of meme trading

In meme trading, when confidence among market participants is high, share prices will soar, even if market conditions or economic fundamentals are weak. [6]

As their online rallies continue on Reddit and Twitter, more and more retail investors across the globe would want a share of the pie. This has snowballing effects on sentiment, with the next investors blindly plonking down their funds as they await the next price surge. In this way, the share prices keep spiralling.

Another mentality behind meme trading is the fear of missing out or FOMO. Basically, it is not that much different from Singaporeans charging to their nearest supermarkets to hoard groceries when Covid-19 circuit breakers are announced. Human psychology is such that when we are unsure what to do, it is always easier to mimic others.

FOMO is exacerbated by early-bird investors who blog about their overnight rags-to-riches stories on social media. [7] This makes for a perfect recipe for meme stocks to be born, with social media at its core.

The following cycle explains how meme stocks work:

1. Early-adopter phase: a company is identified to be undervalued by a number of retail investors, who start to place buy orders.

2. Middle phase: the stock starts to gain attention from other traders, who hop onto the bandwagon. Share price rises.

3. Late/FOMO phase: the stock gains viral attention on social media. Investors who are late to the game purchase the shares out of a fear of missing out on potential profits.

4. Profit-taking phase: buying peaks and the early-bird traders start to take profit. This creates panic selling as investors do not want to lose money. Share price starts to fall.

5. Next cycle: after crashing, the stock may trade sideways and there may little activity for a few weeks or months, until it regains the interest of buyers in a new round of frenzy.

Are meme stocks for me?

As much as meme stocks seem to be great investments, their share prices can only rise so much for so long. When they plummet, investors who buy them after their peak would be burnt! While the rise in meme stocks is fast and steep, their decline can be just as sharp and swift. They are not for the faint-hearted!

The general rule of thumb in investing is to put in only the money that you can and are willing to lose. It means that if you are going to put US$100 dollars in meme shares, you must be mentally prepared to lose that entire US$100. As technical and fundamental analysis is disabled, buying the shares is more a gamble at the poker table than an informed decision.

Meme shares have been known to generate handsome profits for the average investor who enter and exit the market at the perfect timing. There have been investors who put their entire life savings in those shares and struck rich overnight.

But there are also unlucky ones who have lost 60-80% of their savings!

The best recommendation is to look at your own risk profile and investment objectives closely to decide if this kind of short-term and extremely volatile investment is for you.

If you need further clarity, speak to your financial adviser or trading representative at PhillipCapital today.



These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

About the author

Athena Miao

Athena graduated from the National University of Singapore with a Bachelor’s Degree in Economics. She is an ex-MOE teacher who decided to pursue her passion in finance and economics after years of service.

Combining her working experience in UOB as a banker and current position as a dealer managing over 50,000 accounts in Phillip Securities, she firmly believes in making informed decisions to ride the tides of the market. In her free time, she enjoys reading The Economist to review the latest global outlook.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066