What are Memestocks?
“The stock market is a touchstone for the intelligent and a tombstone for the audacious.”
With these words early Financial expert, Joseph De la Vega attempted to understand the workings of the apparent mystical rise and fall of stocks during the 17th century in Amsterdam.
Although investor behaviour has largely stayed the same since then, the power dynamics of who owns most of the stocks today has changed dramatically. No longer are individuals in control of the stock market. Today large players like Hedge Funds, Investment banks, and other financial institutions own the lion's share of the market. One can argue that the current status quo lends itself to an extremely skewed power structure that many deem as one of the main driving forces of financial inequality in the world today.
Enter Meme stocks!
Wait, you mean Meme like an image of a Grumpy Cat with a joke kind of meme?
Exactly!
In short: a meme stock is a stock whose value has exploded beyond anyone's wildest expectations largely driven by social media hype as opposed to traditionally accepted fundamentals like value analysis, profit, and loss, or how well a company is managed. This all generally happens in a very short amount of time presenting tremendous opportunity and of course tremendous risk.
Over the past couple of years, Meme stock’s influence on the market in terms of powerful valuation changes has dramatically increased. No investor worth his salt today can afford to ignore this phenomenon any longer.
How to recognize Memestocks?
Although Meme stock is an extremely new phenomenon that is continuously evolving, some definite characteristics make them easier to spot:
- They are generally overpriced.
- They experience astronomical growth in a very short period.
- They are popular among millennials and Gen-Z investors using commission-free trading platforms.
- They are considered highly volatile with a valuation based on perceived potential rather than financials.
- Their hype or popularity is fueled by an engaging online presence.
FOMO (The Fear of Missing Out) is a large driving factor to blindly buy these stocks that are at the time considered to be the next big thing. These investors have shown the world that they can mobilize in droves behind a particular stock and rally a lot of capital in a short amount of time to dramatically influence stock price movement.
Tesla is a great example of this: Since its establishment in 2010 its shares have surged over 21 thousand percent.
Elon Musk (CEO of Tesla) was able to create a super loyal fanbase over the years by aligning his brand to match what millennials and Gen-Ze-ers find important. His tweets are considered gospel in the world of commission-free online investing. We see this play out in the way Musk is able to swing the price of digital currencies with a few tweets alone, causing massive but extremely short-lived spikes in prices.
Meme Stocks like; Tesla, Netflix, Gamestop, and digital currencies like Bitcoin, and Dogecoin should all be thanking memes and social media for driving that hype.
How do Meme Stocks Work?
One thing is clear; the meme stock phenomenon has permanently shifted the way a large section of investors evaluates stock potential. The cost of ignoring these emerging investors' class is becoming too high. Every business should try to evolve its practices as soon as possible to harness the huge potential Meme Stocks presents.
What is quite surprising is that the Meme stocks cycle work very similar to how one would approach a typical marketing funnel:
Early Adopter phase:
This is where a business draws attention by aligning themselves to values or issues important to would-be investors. The main focus is making as many people as possible aware of the brand and why they should buy into the hype. At this stage, individual investors start paying attention and investing in an undervalued business largely based on perceived potential.
Middle Phase:
At this stage the brand is continuing to build on their established consistent communication, convincing evermore would-be investors of their perceived growth potential. More and more investors consider the stock, and the more investors there are the more convincing the hype.
FOMO Phase:
In this stage, the stock has gone viral! The brand has reached a certain level of notoriety that sees its current investors advocate to new investors on the brand’s behalf. The fear of missing out on the next big opportunity is an extremely effective driver to convince people with very little time or knowledge of investing to take a chance on this stock.
Pay-day Phase:
Within a few days, the buying peaks. Early investors sell their stocks, creating a panic-selling situation as investors sell as much as possible to avoid losing money. When the dust settles there are winners and losers.
How to turn your stocks into a meme stock?
Now it’s true that not every stock will become the next Gamestop, but there are certain growth strategies that brands should implement to harness the benefits associated with this Meme stock phenomenon.
AMP43 is an agency that takes the guesswork out of this process. They are specialised experts with the knowledge and experience to attract and engage a wide audience to your brand. The simple formula to Meme stock success is: the more people see and interact with your brand the more potential for them to be convinced of your stock’s value and ultimately invest.
At AMP43, part of their growth strategy is creating awareness by leaning into what speaks to millennial and Gen-Z investors. Influencer marketing, paid search ads, and social media ads are all tactics employed as part of the solution.
This growth strategy is constantly monitored by paying attention to google trends, and impressions and adjustments are made with the goal firmly in mind.
In the rapidly changing world of investment we find ourselves in, AMP43 is the team you want on your side.