Why Investors Are Finally Dumping These 5 Meme Stocks When I needed a new vacuum cleaner last month, I knew exactly where to go: Bed Bath & Beyond Inc. (BBBY). The New Jersey-based retailer, which filed for Chapter 11 on April 23, had been on bankruptcy watch since February, when creditors and suppliers began yanking liquidity. We’d all seen this story before, and InvestorPlace.com writer Thomas Niel pulled no punches in an analysis a couple of weeks before BBBY’s bankruptcy filing.
Time to use those expiring coupons!
At the time, many retail investors seemed entirely caught off guard. Meme investors were still buying until the very end, and some are still holding on.
“I think that Bed Bath & Beyond, even in bankruptcy, is one of the best deals in the stock market,” one 25-year-old investor said in an interview with The Wall Street Journal earlier this this month. The newspaper noted how many BBBY investors remain committed, even as shares moved onto the over-the-counter (OTC) exchange.
Nevertheless, we've begun noticing a broad shift away from such meme stocks and coins in retail investor sentiment at InvestorPlace.com, our free market news site. Our editor’s inbox has seen an uptick in readers thanking us for bearish takes (a rarity!), and articles like Omor Ibne Ehsan’s “3 Cryptos to Sell in May and Go Away” have received heavy readership.
We know you folks probably haven’t bought these… and that you likely never will.
But to give you a sense of what’s going on in some of the deeper recesses of the retail investor world, let’s take a closer look at five meme stocks that investors are finally dumping... ADVERTISEMENT Elon Musk May Have Just Changed Everything Quantum Computing, 3D Printing, and Gene-Editing… These are three of the most disruptive pieces of technology in recent times…
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Learn all about it here. 1. Mullen Automotive: A Meme Stock Collapses In January, I wrote how electric vehicle startup Mullen Automotive Inc. (MULN) had become the new Dogecoin (DOGE), with none of the fun. Fans of the zero-revenue company seemed more interested in proving how right they were about the stock than making money.
It took until a 25-for-1 reverse stock split on May 4 to change the tune. Suddenly, former fans began realizing that management at the EV startup seemed more committed to enriching insiders than rewarding external shareholders. The reverse stock split to regain a $1 minimum bid for listing requirements was the last straw.
InvestorPlace.com assistant news writer Eddie Pan has been carefully documenting the precipitous fall in Mullen’s share price. As the world’s top meme stock continues to drown in dilutive stock, don’t be surprised if the firm declares bankruptcy sooner than expected. 2. Plug Power: Trying New Tactics Shares of once-promising Plug Power Inc. (PLUG) have fallen by a third this year as competition heats up in the green energy space. As Louis Navellier and his team noted earlier this month for InvestorPlace.com: Let’s be frank about this. There are plenty of businesses out there already, including some publicly traded ones, that are already in the EV charging business. Plug Power won’t be a first, second or third mover in this highly competitive field. Essentially, Plug Power's hydrogen fuel cell technology is quickly falling behind lithium-ion technologies. Attempts to escape into EV charging exposes the firm to competition from better-funded rivals.
Retail investors are also beginning to abandon the stock. According to data from Fintel, the estimated share of retail investors has fallen by a third since October. Shares are down 30% since January, and Louis continues to warn investors to stay away. ADVERTISEMENT The Secret Income Blueprint of the Rich Secret strategy of the 1% generates big cash payouts from ordinary stocks. Legendary growth investor Louis Navellier has made a career out of finding stocks at the perfect time for huge capital gains. Now he’s showing how they can be turned into cash-generating powerhouses. Click to learn this secret of the ultra-wealthy. 3. Lordstown Motors : A Slow Flameout Often, meme stock investors stick around for longer than you might expect.
In 2020, as we reported at InvestorPlace.com, the Ohio-based Lordstown Motors Corp. (RIDE) looked ready to fall to $0. The electric pickup startup was using inflated figures to hide the lack of any meaningful pre-orders and were “selling pickups to Wall Street instead of Main Street.” The short sellers at Hindenburg Research would publish a similar critique four months later.
It would take another two years for RIDE shares to sink below $1 this March. And then, things got even worse quickly. By May, shares had collapsed to $0.28, forcing the questionable firm to reverse-split its shares. The acceleration of Lordstown’s fall has been closely documented by William White at InvestorPlace.com.
Recent market data from Fintel shows us that available shares for sorting have fallen to near zero as short sellers outnumber buyers. History tells us these events are highly bearish signs, and retail investors are, for once, beginning to listen. 4. Pepe: Mixing Memes and Madness In early May, prices of meme cryptocurrency Pepe (PEPE) rose 20-fold on speculative purchasing. Its unrelated BRC-20 token would see even greater percentage gains.
But as we know... easy come, easy go.
Omor Ibne Ehsan was quick to document at InvestorPlace.com how meme coins – especially Pepe – “are not worth it, especially not near their peak.” I’ve seen this story before with other meme coins. Dogecoin, the original dog-themed meme coin, has crashed over 88% since its peak. Apecoin (APE), another meme coin that I warned about a few months after its launch, has virtually stopped being relevant after dropping 91.5%-plus from its all-time high.
Pepe is a sell, as it offers no long-term potential and is likely to keep sliding downwards. We can see how interest in Pepe and related spinoffs has begun to wane. Full turnover of the meme coin’s market capitalization now takes around four days, up from 20 hours earlier this month. Ethereum transaction fees – which spiked in early May on speculative meme coin trading – is down 50%.
To most investors, Pepe would seem like an obvious dud. But with a $600 million market capitalization, there’s surely more downside to be had. 5. AMC: Dethroning the King of the Apes Finally, retail investors are beginning to lose interest in AMC Entertainment Holdings Inc. (AMC), one of the biggest meme stocks of all. The cinema chain has seen a rapid decline in retail ownership this year, as noted by Fintel, a financial data collection firm. Estimated retail ownership has declined by about 50% since December, and is 70% lower than it was this time last year.
Over at InvestorPlace.com, David Moadel and Eddie Pan have been documenting sales by institutional investors as well. Recent filings reveal that Bridgewater Associates sold its entire AMC position during this year’s first quarter, while Antara Capital dumped 2million units of AMC Preferred Equity Units (APE).
One major cause is the upcoming merge between AMC’s common stock with its APE preferred shares. The dilutive event has been stalled by Delaware courts, leaving fundraising efforts in limbo.
This will leave America’s largest theater chain with limited cash in the near term. The company is already down to $496 million in liquidity, down from $1.2 billion last June. Unless the firm can raise fresh equity capital soon, CEO Adam Aron will be forced to turn back to the debt markets that almost sank the firm once before.
Investors once hoped that AMC could consolidate the industry and become a rare meme-stock success story. Waning interest from primate-themed investors are now throwing that into question. ADVERTISEMENT Bigger Than Tesla Elon Musk just flipped the switch on a new tech that’s set to be bigger than Tesla, SpaceX, and PayPal combined. Learn about it here. The School of Hard Knocks Every experienced investor will have a story of their worst investment. Warren Buffett himself admitted in 2007 that his investment in no-moat Dexter Shoes was an utter disaster. I’ll make more mistakes in the future – you can bet on that. A line from Bobby Bare’s country song explains what too often happens with acquisitions: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.” Nevertheless, top investors all learn from their mistakes. Buffett now rarely uses Berkshire Hathaway Inc. (BRK.A, B) stock to fund deals, knowing these stock-for-stock deals will compound any problems.
And now we’re seeing that even meme investors seem to be learning from waking up with “ugly” stocks in bed. It’s surely been an expensive lesson. But all experienced investors know that the School of Hard Knocks never comes cheap.
The latest boom in artificial intelligence already is producing its fair share of worthless meme stocks... or at least meme-stock like bumps for whenever a company says it’s adopting AI. But this technology is the real deal and will produce outstanding results for many companies – and their investors – over the coming years.
That’s why InvestorPlace Senior Investment Analyst Eric Fry last month traveled to San Francisco. While there, he took a deeper look into where, a few years ago, a small group of Silicon Valley billionaires launched what Eric calls “Project Omega.” What’s powering this project, he says, could soon mint a new wave of millionaires, billionaires and even the world’s first trillionaire… while at the same time plunging millions of unprepared Americans into financial distress.
While millions of Americans will end up on the losing side of this paradigm shift… you do NOT have to be one of them.
Eric has put together a video presentation on everything you need to know about Project Omega and how AI tech could affect your life (and portfolio). Check it out here.
In the meantime, we hope you all are having a restful Memorial Day weekend. We’ll see you next week.
Regards,
Thomas Yeung, CFA
Market Analyst, InvestorPlace.com | 
