When GameStop Corp GME skyrocketed 2,311% over just 11 trading days between Jan. 13 and Jan. 28, 2021, the scales of power between retail traders and institutional investors shifted.
The event, which took place during the middle of two years of rolling COVID-19 lockdowns, after retail traders took to the stock market in droves, kicked off a battle between "small money" and Wall Street that eventually wound up before Congress.
Although the GameStop battle looks to have ended, the war rages on, with retail traders routinely squeezing institutional short sellers in other stocks.
For some, seeing a stock skyrocketing 25%, 100% or even 500% in a single trading session may seem random, but StockTwits CEO Rishi Khanna sees similarities in the stocks that squeeze shorts. He notes that many of them are found on StockTwits feeds, and for good reason: StockTwits is the largest social network for traders and investors and grew by 50% to 6 million users during the height of the meme stock craze.
Rishi Khanna On Main Street Vs Wall Street: “There’s a Main Street vs. Wall Street phenomenon –investors are obsessed with companies going bankrupt. There’s a disdain for short sellers and Wall Street taking down companies, which tend to be brand names,” Khanna told Benzinga in an interview on Monday.
Khanna noted the current high volatility in Carvana Co CVNA, a top-five ticker on StockTwits on Monday, which surged 75% between Friday and the high-of-day on Tuesday. Carvana’s stock was decimated last year amid bankruptcy concerns and is heavily shorted, with short interest measuring between 65% and 85%.
Khanna pointed out that Hertz was in the same situation, which led to its eventual short squeeze (Hertz skyrocketed 1,935% between May 3, 2021, and Nov. 2 of that same year).
Also Read: How The GameStop Chart Looks Following 2-Year Anniversary Of First Historic Short Squeeze
Khanna On What’s Changed And What’s Next: Although the premise of the war remains the same, Khanna has seen several changes take place in how retail trades and the sectors drawing their interest.
Perhaps notably, Khanna believes retail traders are now spending more time researching a stock before executing a trade compared to the beginning of the meme stock craze, when traders would FOMO into popular tickers.
Research provides retail traders more of an advantage against big money, and Khanna is seeing users on StockTwits spending more time doing due diligence.
In terms of sectors, Khanna saw retail interest in special purpose acquisition companies wane, but believes big brand names are here to stay. “Meme stocks like Bed Bath & Beyond and AMC remain alive. We’re seeing consistently high messaging volumes on the StockTwits Platform around these stocks – AMC finished as the number one most discussed in both 2022 and 2021,” Khanna said.
For 2023, Khanna sees EVs becoming even more popular, including but not limited to what he called the “godfather of meme stocks –Tesla.” This year, Khanna predicts there will be increased interest in smaller EV stocks such as Lucid Group Inc LCID and Fisker Inc FSR, both of which enjoyed rallies recently following rumors of a major investment in the former.
On seeing more short squeezes play out in 2023, Khanna believes the macroeconomic environment may prove difficult for more companies financially, possibly moving a larger number toward bankruptcy, which could provide an opportunity for retail traders.
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