![\"Meme](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/cc087c58fec04a96be83c84998fbd5405f9acee2.jpeg\")
<\/p>\nNothing about the investment fundamentals made them look like a buying opportunity. But that\u2019s their appeal to the army of online investors who use the collective power of social media to buy the stock and buck the establishment.<\/p>\n
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Most of these companies have been short sold by large conventional investors (which means the smart money has placed a bet on their shares going down.)<\/p>\n
So a bunch of small punters piling in and pushing up their shares looks something like the revenge of the uninformed with a lashing of cognitive dissonance.<\/p>\n
But swimming against the investing establishment is precisely what meme stocks are playing out.<\/p>\n
It has a certain David and Goliath feel to it.<\/p>\n
When the first meme wave hit during the COVID-19 pandemic, institutional shareholders that had placed bets on stocks falling were financially injured \u2013 some sustaining third-degree burns.<\/p>\n
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Meme stock GameStop had a dizzying rally as bullish day traders kept the upper hand over short sellers. Credit: Bloomberg<\/p>\n
That meme craze was played out at a time when retail investors were flush with funds from government stimulus programs and had time to spare, thanks to lockdowns.<\/p>\n
The second meme wave is now hitting, and these retail punters are (to butcher the Prince lyric) partying like it\u2019s 2021.<\/p>\n
Most of these first-wave meme stocks, such as theatre group AMC and GameStop, saw their shares return from the stratosphere. But the meme phenomenon inspired the film Dumb Money, in which a bunch of working-class traders beat the system and made a fortune.<\/p>\n
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It is difficult to know how a meme stock is chosen, but for the most part, there are common features.<\/p>\n
They are usually underperforming businesses that are in competitive industries and are often structurally challenged \u2013 AMC and GameStop fit these parameters very neatly.<\/p>\n
In most cases, they are still household names or operate strong consumer brands that the community can recognise \u2013 such as Krispy Kreme and Kohl\u2019s.<\/p>\n
Rocket Lab is a little different from the pack in this regard. Although it has a market capitalisation of around $30 billion and is yet to make a profit, its shares had already taken off thanks to launching several satellites.<\/p>\n
But all have been the target of short-selling and now revenge-buying.<\/p>\n