The retail investor base that rose to prominence in the recent ‘memestock’ trading frenzy around shares in AMC Entertainment Holdings Inc (NYSE:AMC) and GameStop Corp (NYSE:GME) should be recognised as an “important market participant” whose influence will only grow, according to analysts at Liberum.
In a note on Friday, the broker said the influence of the retail investor collective has been bolstered by “the culmination of technological and cultural changes” and has led to “ever-more effective communication, facilitating coordination as an impactful collective”.
“The influence retail investors can collectively exert is likely to grow, particularly in the UK and Europe, and does not represent a fad”, Liberum said, adding that while recent retail frenzies have focused on ‘squeezing’ heavily shorted stocks, these kinds of targets were now thin on the ground and as a result, the collective is “likely to choose a different story or anomaly for their next meme”.
“Representing a clear breakaway from the ‘traditional’ drivers of equity markets, online activity is easy to dismiss as a fad falling in a surreal 2020. We recommend that equity investors keep an open mind. Technology and cultural norms can move as quickly as financial markets. Whether by horse-back messenger, pigeon, telegraph, telephone or the Internet, investors have always sought after effective and efficient communication. Memes, whilst with the addition of humour, could be said to be nothing more than an evolution of formats and an amalgamation of the many technological and cultural changes”, the broker said.
“If this is the way society is heading, best to adapt rather than resist”, they added.
Liberum’s assessment is likely to be greeted with relief by some memestock investors, who will be hoping the notable stocks can recover some ground after a bruising week.
AMC has seen its share price decline around 22% so far this week, while GameStop is down 12.8%.
However, there were signs of a recovery in pre-market trading in New York on Friday, with AMC up 4.4% at US$37.59 and GameStop rising 4.3% to US$166.82.