Meme stocks, or investments that go viral due to social media or stock-trading message boards, keep making news in the markets -- this time for some remarkable drops in prices. Bed Bath & Beyond, AMC and GameStop have all seen their stocks crash lately.

Bed Bath & Beyond -- which saw a large price spike only weeks ago -- announced Wednesday it is closing 150 stores. Its stock has tumbled from over $23 on Aug. 17 to a current price under $10.

Movie theater chain AMC Entertainment released a "special preferred stock dividend" called APE to its investors on Aug. 22. The company released the dividend stock in a plan to raise capital by issuing new shares instead of a stock split. The stock has plummeted post-APE, with AMC losing about two-thirds of its value in the past two weeks.

GameStop -- the granddaddy of meme stocks, chaired by "meme baron" Ryan Cohen -- has also struggled lately, dropping about 40% from a recent high price point in early August.

In 2021, meme stocks like GameStop exploded in price due to large groups of retail investors promoting massive purchases online. A coordinated "short squeeze" of GameStop in January 2021 took its stock price over $500 -- 30 times more than its $17.25 valuation at the start of the year.

Hedge funds who had heavily "shorted" GameStop -- expecting its price to fall -- freaked out. Popular online brokerage Robinhood froze trading for GameStop and other meme stocks, earning the ire of both investors and politicians, displayed as well as a class-action lawsuit. 

The whole GameStop stock phenomenon was the subject of a documentary called Rise of the Players, and it will also hit the big screen in a newly announced feature starring Seth Rogen and Pete Davidson.

What are meme stocks and why are they making news in the stock market? Learn why these stocks often trade for much more than their indicated worth and how online campaigns for meme stocks operate.

Note: Meme stocks are highly volatile and have seen wild price swings up and down over the past few years. These stocks come with a high level of risk and should be treated accordingly. If you're not an experienced investor, we recommend getting professional financial advice before investing any money in the stock market.

What are meme stocks?

Meme stocks are the shares of companies that have gone viral online, primarily propelled by social media hype. The price of a meme stock often rises considerably higher than the value suggested by its company's financial performance. 

Meme stock companies are promoted in online message boards and on social media sites like Reddit, YouTube, Twitter and Facebook, typically through the sharing of memes. A meme is an idea or cultural signifier -- often a humorous image or animated gif -- that becomes popular online, usually via social media platforms.

Communities promoting meme stocks have their own terms and slang, including "stonks" (a funny term for stocks) and "bagholder" (someone who holds onto a meme stock after its price has crashed).

Who is promoting meme stocks online?

The subreddit WallStreetBets -- commonly referred to as /r/WallStreetBets or WSB -- on the social-media site Reddit is the epicenter of meme stocks. Started in 2012 by Jaime Rogozinski, the community message board has since experienced drama related to removing moderators with possible conflicts of interest.

/r/WallStreetBets

WallStreetBets moved from internet niche to household name when it pushed GameStop in January 2021. First promoted by user Roaring Kitty in August 2020, the short squeeze of GameStop hit the right notes for going viral -- an outdated but popular gaming company that Wall Street had left for dead, plus a chance for small investors to "stick it to the man" by hurting hedge funds that had shorted the stock heavily.

The WallStreetBets subreddit hit its zenith of virality on Jan. 26, 2021, when Elon Musk tweeted out a link to the board with a one-word message: "Gamestonk!!" The WallStreetBets community currently has 12.5 million members.

Before GameStop, WallStreetBets had become popular online for its aggressive trading strategies, low-brow humor and YOLO ("you only live once") attitude toward investing, with Vice magazine labeling it "the 4chan of finance." An increase in contributors to the subreddit in the late 2010s was likely fueled by the rise of no-commission brokerages like Robinhood and mobile stock trading.

Other internet sites, such as the social media company StockTwits, have been involved in promoting meme stocks, but not on the same scale or with as large an impact as WallStreetBets.

How did meme stocks prices get so high?

It's all about critical mass. For any meme stock to make a noticeable spike in price, enough investors need to be convinced to buy the stock. As early adopters convince investors to buy in, the price starts to rise, attracting more investors struck by FOMO ("fear of missing out"). At some point in a meme stock's rise, owners of the stock start to cash out, bringing the price downward again.

In the case of GameStop, the heavily shorted positions held by hedge funds further helped fuel the rise of the stock price. As investors pushed the price of GameStop skyward, short sellers were forced to buy the stock to cover their positions, making the price of the stock go even higher. 

What are the companies whose shares have become meme stocks?

Aside from GameStop, AMC and Bed Bath & Beyond, several more companies have been taken on the meme stock ride over the past few years. These companies include:

One new meme stock that made a gigantic splash this summer is AMTD Digital Inc., a Hong Kong-based financial technology company with about 50 employees. Near $16 in mid-July, its stock price leapt up to more than $2,000 in early August, putting its value at 4,000 times its earnings and placing it temporarily in the top 10 most valuable publicly traded companies in the world. Its price has since dropped back to just over $100.

What's different about meme stocks in 2022?

While the practice of pumping up stock prices far beyond their companies' value has been popular in the past few years, the novelty of the concept may have worn off in 2022. 

Casual investors who took part in the GameStop squeeze might not be as motivated to participate in pumping up less-iconic companies like Tilray Brands or Palantir. They might also have lost significant money last year when GameStop's price crashed in 2021 from a peak of $483 to $53.50 in about a week.

In an interview with Yahoo Finance, Interactive Brokers' chief strategist Steve Sosnick argues that the pool of meme-stock investors has shrunk considerably, making GameStop-style stock price spikes less likely.

"[With] the initial meme stock craze you had people coming in who never invested before putting money into these stocks and investing," Sosnick said. "Now it seems to be the same cast of characters chasing the same list of names with a couple of new exceptions every so often."

Ironically, meme stocks may have become part of the traditional stock-market industry that they were threatening in 2021. Financial advisor Roundhill Investments has created an exchange-traded fund (a tradeable mutual fund) based on meme stocks. The fund currently includes securities such as AMC, Palantir and Novavax.