The stonks meme - a phenomenon that's left many of us scratching our heads. Essentially, stonks refers to a stock or investment that's skyrocketing in value.
This meme originated from a 2020 tweet by the popular Twitter account @elonmusk, where he joked about his dog's "stonk" playing in the background.
The term quickly gained traction online, with people using it to describe any investment or stock that's experiencing rapid growth.
Definition of
Meme stocks refer to shares of a company that have gained viral popularity due to heightened social sentiment.
The social sentiment is usually due to activity online, particularly on social media platforms, where online communities can dedicate heavy research and resources toward a particular stock.
Meme stocks often have heavier discourse and analysis in discussion threads on websites like Reddit.
These online communities can be unorganized sets of independent individuals, each with their own investment views and preferences.
The word "stonks" is slang that purposely misspells the word "stocks" and is often used to humorously describe the stock market.
"Stonks" was first introduced in 2017 as part of an internet stock market meme.
The original meme featured a cartoon person wearing a suit in front of a graphic showing stock market numbers with a red arrow pointing up and to the right.
A certified financial planner, J.J. Wenrich, describes "stonks" as a goofy, often sarcastic way of saying or spelling stocks.
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Understanding the Concept
The stonks meme emerged in 2020 on the Reddit forum r/wallstreetbets, where users work together to identify target stocks and promote them.
Meme stocks, like GameStop, saw a huge surge in price, with the stock chart shooting up astronomically as retail investors bought in. The share price increase hurt hedge funds that had shorted the stock.
Retail investors, often millennials and Gen-Zers, are driving the stonks meme, with many opening new investment accounts during the coronavirus pandemic. A record three million new users joined Robinhood in the first quarter of 2020.
The stonks meme is about betting on the stock market, with some investors, like Dave Portnoy, depositing large sums of money to trade live under a stream.
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How They Work
Meme stocks emerged in 2020 through the Reddit forum r/wallstreetbets, known for its unconventional and irreverent tone.
Users of WallStreetBets work together to identify target stocks, promote them, and put their own money to work, often buying and holding even after the price spikes.
The promotion of meme stocks is different from online pump-and-dump schemes, which aim to defraud unwitting investors.
Retail investors banded together to counter a hedge fund's short position on GameStop stock in early 2021, leading to a surge in the stock's price.
The hedge fund had shorted GameStop's stock, betting on a decline in its share price, but the sudden increase in the stock price hurt their chances of a successful short.
GameStop's stock price increased astronomically as retail investors, urged by the Reddit page WallStreetBets, started buying, eventually hitting a high of $483 on January 28, 2021.
The average closing price of GameStop's stock between January 2016 and January 2021 was $19.54, with the highest price hit in trading during that time being $33.70 in April 2016.
Regulatory scrutiny and the popular investing app Robinhood temporarily stopping trades of GameStop eventually brought the frenzied trading to a halt.
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During the Coronavirus
During the Coronavirus, the stock market saw a surge in new investors, with an estimated 10 million new investment accounts opened, mostly by millennials and Gen-Zers who were bored at home during quarantine.
This influx of new traders led to a record three million new users on the trading app Robinhood during the first quarter of 2020.
Dave Portnoy, also known as El Pres, deposited $3 million and started trading under the live stream Davey Day Trader Global, which gained hundreds of thousands of views.
Stocks only go up, or so El Pres thought, as he believed the stock market was like Monopoly and you couldn't lose.
However, El Pres found himself down $700K by the end of his first week and was soon banned from E-trade.
In contrast, Richard Dobatse, a 31-year-old, took out $15,000 in credit and two $30,000 home-equity loans to fund his early losses, but managed to turn them into $1 million before ending up down to $6,000.
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Short Squeeze
A short squeeze is a powerful force that can send a stock's price soaring. It happens when a lot of people have sold a stock short, betting that its price will go down.
As the price of the shorted stock rises, the short sellers start to lose money. They must cover their losses by buying back the shares, which adds to the upward pressure on the stock's price.
Short selling involves selling shares you don't own, hoping to buy them back at a lower price. It's a bet that prices will go down, but it can backfire if the stock price surges instead.
The more shares that are sold short, the harder it is to borrow shares to sell. Meme stocks like GameStop are often hard to borrow, with a high short-interest ratio.
A short squeeze can be triggered by a sudden increase in demand for the stock, like when Roaring Kitty posted a viral video predicting GameStop's price would soar. This can prompt short sellers to cover their positions, driving the stock's price even higher.
In January 2021, the short squeeze that Roaring Kitty had predicted took place in earnest, with GameStop's price exploding to nearly $500 amid a frenzy of short-covering and panic buying.
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Short Selling
Short selling is when someone sells shares they don't own, hoping to buy them back at a lower price. This is a bet that prices will go down.
Short selling requires borrowing shares from someone who owns them, and as more shares are sold short, fewer shares are left available to borrow.
Meme stocks tend to be heavily shorted names, with a large proportion of the company's outstanding shares sold short.
A high short-interest ratio means a stock is hard to borrow, even for the most motivated short sellers.
Meme stocks often have a high short-interest ratio, making it difficult for short sellers to borrow shares.
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Stocks in the Community
The stonks meme has become a staple in online communities, particularly in forums like /r/WallStreetBets, where users invest in seemingly dying stocks to turn a profit.
In these communities, the term "Stonks" is frequently used to refer to meme stocks, such as Gamestop, which saw a significant price surge in 2021.
The meme stock craze has been fueled by retail investors, dominated by younger investors, who are attracted to the potential for outsized returns in a short period.
Meme stocks like Bed Bath & Beyond (BBBY) have been pumped to extreme levels by these communities, only to crash back down, leaving investors with significant losses.
Retail investors are likely to remain keen on picking up the latest meme stock, despite their volatility and risk.
Use in Communities
Meme Stock communities like /r/WallStreetBets frequently use the term "Stonks" to refer to seemingly dying stocks like Gamestop.
The term "Stonks" is intentionally misspelled to joke about individual stocks or questionable financial decisions. This lighthearted approach is characteristic of the meme culture that surrounds these stocks.
The Gamestop Short Squeeze sparked a wave of similar Meme Stocks, which are now referred to as "Stonks" in these communities. This phenomenon highlights the rapid spread of ideas and memes on social media and web forums.
These communities have built a culture around Meme Stocks, promoting hype and elaborating on the original meme with specific terms and symbols.
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Where Are They Today?
Many meme stocks that saw high prices in 2021 have come down significantly in 2022, trading below their pre-meme levels.
GameStop remains elevated, but still far lower than its all-time highs.
Retail investors are still keen on picking up meme stocks, which are seen as a way to generate outsized returns in a short period.
Meme stocks are very volatile and risky, and retail investors are likely to experience losses when they crash down.
Bed Bath & Beyond was pumped by meme stock communities to extreme levels in the summer of 2022, rising 314% before crashing back down.
Retail investors, dominated by younger investors, are likely to remain keen on meme stocks despite the risks.
Frequently Asked Questions
What does stonks mean in slang?
In internet slang, "stonks" refers to stocks, often used humorously or ironically to comment on financial losses. It's a playful misspelling of "stocks" that's gained popularity in online conversations.
Who started stonks?
Unfortunately, the origin of the term "stonks" is not specified in the provided text. However, it gained popularity on social media platforms like Twitter and Reddit.
Who made the stonks guy?
Meme Man, also known as the "stonks guy", was popularized by users of the subreddit r/wallstreetbets during the 2021 GameStop short squeeze. His origins can be traced back to the artist "Special meme fresh" in the mid-2010s.
What is stonks fun?
Stonks" is a humorous term used to poke fun at the stock market and financial decisions, often in a lighthearted or ironic way. It's a playful meme that can add some humor to discussions about stocks and investing.
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