It’s happening again.
On Wednesday, shares of AMC and GameStop soared 18% and 104%, respectively, as investors try to recreate the huge runs that the “Reddit stocks” saw last month. GameStop—their main target—closed Wednesday at $91.71, up $46.74 on the day.
But why would investors do this again? AMC’s movie theaters are struggling during the pandemic, while GameStop has been closing stores for years, including over 400 in 2020 alone. Not to mention runs like this almost always end in a bust. Just look at GameStop’s [ticker: GME] boom and subsequent bust last month: GME quickly rose from $18.84 at the start of 2021 to $483 during intraday trading on Jan. 28. By mid-February it was under $50.
To better understand investor mindsets, we looked over polling we conducted following the first boom. Coins2Day and Civis Analytics conducted a survey of 2,336 U.S. Adults, including 1,378 investors, between Feb. 5 and 7. The survey has a 3 percentage point margin of error. At investor level, the margin of error is higher, at 3.9 percentage points.
Many traders on the r/WallStreetBets subreddit primarily saw GME as a way to burn some hedge funds (read: Melvin Capital) while also making a quick buck. But not everyone saw it that way.
Our survey found that among U.S. Investors who bought GME or AMC this year, 36% saw it as a short-term investment and 19% attributed the purchase to FOMO. However, 35% also saw it as a long-term investment.
Low-income investors were even more likely to get burnt: Among individuals earning less than $25,000, 46% bought AMC or GME thinking it was a long-term investment. That figure was 31% for earners over $100,000.
Simply put, a lot of people who are investing in these “Reddit stocks” think it’s a sound financial choice.
*Methodology: The Coins2Day–Civis Analytics survey was conducted between Feb. 5 and 7. We surveyed 2,336 U.S. Adults, including 1,378 investors. The findings have been weighted for age, race, sex, education, and geography. The survey has a 3 percentage point margin of error. When broken-down to an investor-level it rises to 3.9 percentage points.
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