Title. How does a stock move so violently without any news from the company?
In: Economics
A stock’s price is influenced by 1. News, 2. Fundamentals and 3. Expectations of investors.
3 typically is informed by 1 and 2, this however is not necessarily the case for what we colloquially call “meme stocks” (which I do not have a good definition for). We just observe that for certain types of stocks popular in online communities, expectations of investors are less informed by 1 and 2, but more by general sentiment of the respective community, which often forms their opinion based on previous sentiment, more and more decoupling the value of the stock from anything tangible in the real world.
In the case of GME: a user called Roaring Kitty, who started the original rally behind the GME stock by sharing his analysis that the stock was being shorted to an unusual degree, posted a meme on his Twitter after several years (? Months? ) of silence. The online communities interested in GME interpreted this tweet to mean that roaring kitty is “back in the game” so to speak, meaning that even if there is no specific news regarding GME to be found, this one person who saw the original opportunity supposedly is seeing something else now, causing everyone to buy the stock in hopes of getting in on that short squeeze they have all been dreaming about for years.
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