Meme Stocks Can Crush You

By Douglas A. McIntyre Published Jul 23, 9:15AM EDT

Quick Read

The rally and crash of Kohl’s Corp. (NYSE: KSS) stock crushed unlucky investors.
Fast-moving meme stocks can be poison for many investors.

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Meme Stocks Can Crush You — © Victoria Gnatiuk / iStock via Getty Images

Yesterday, shares of medium-sized retailer Kohl’s Corp. (NYSE: KSS | KSS Price Prediction) rose over 100% at the open to over $21. They almost immediately crashed to $14, after trading below $10 the day before. Kohl’s financials have been mediocre. “I’ve been seeing signs of a ‘flight to crap’ recently,” Steve Sosnick, chief strategist at Interactive Brokers told Bloomberg.

Anyone who knew to sell Kohl’s immediately after the run-up made a fortune. Those who bought at above $20 were crushed. The move in and out of the stock was extraordinary. It usually trades 12 million shares a day. Yesterday, it traded 208 million. That’s twice what Tesla Inc. (NASDAQ: TSLA) trades in a day, and Tesla usually is the most widely traded stock on any exchange.

The huge swing in the Kohl’s share price is largely harmless, except for to thousands of people who lost money. The federal government does not care. The SEC or other agency did not intervene.

In the most recent quarter, Kohl’s revenues were down fractionally to $3.1 billion. Per-share earnings of ($0.13) compared to ($0.24) the year before. Michael Bender, Kohl’s interim chief executive officer, could do little more than thank his employees.

Meme Stocks Are Poison?

Meme stocks are good to trade for people who have a portfolio with some room for losers. For everyone else, they are a sort of poison.

There have been meme stocks before. These are stocks that move fast based on social media posts. Most experts trace the massive volatility and volume in the trading of stocks to January 2021. GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc. (NYSE: AMC) were early stocks with meme status. Traders could move to the stocks quickly due to commission-free trading on Robinhood. Short-selling hedge funds tried to front-run the trades. Since professional traders rarely disclose their results, it is hard to say how many have made money.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.