AMC, GameStop on Regulators’ Radar, as SEC Says it is Monitoring Meme Stocks
Meme stocks, notably AMC Entertainment and GameStop, which continue to be on a wild ride, are garnering once again the attention of regulators.
The U.S. Securities and Exchange Commission said yesterday it was monitoring the stocks, amid the latest market frenzy they are triggering.
“SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading or other misconduct. In addition, we will act to protect retail investors if violations of federal securities laws are found,” the SEC said in a statement sent to GOBankingrates.
AMC spiked 15% on Monday and is up 2,500% in the year to date, while shares of GameStop closed up almost 13% yesterday and are up 1,400% this year, MarketWatch reports.
The theater chain’s stock was halted multiple times last week because of its volatility and the frenzy it triggered, aided by Reddit threads, notably the subthread WallStreetBets. In addition, the company filed to sell 11.5 million shares of its stock last week, which sent the assett immediately tumbling.
“We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” the company said in a Securities and Exchange Commission filing. “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”
As of this writing, AMC was at $56.
Nancy Tengler CIO at Laffer Tengler Investments urged investors in an op-ed in USA Today to avoid meme stocks at all costs.
“When the narrative doesn’t make sense it is because it doesn’t make sense. Eventually, reality will catch up. This is not to say that some traders won’t make money. They will. But home run streaks eventually end,” she wrote, adding that “if you are an investor, resist the temptation to chase these names. Enjoy the singles and doubles in your portfolio. Over the long-term, stocks generate real (after inflation) returns in the high single digits, and nominal returns are closer to 8% to 9%. The rule of 72 reminds us, at that rate, you will double your money every eight to nine years.”
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