Meme stocks are characterized by high volatility and their prices are driven up by social media groups, without reflecting the actual value of the company. The phenomenon emerged during the 2021 pandemic when, among other things, Gamestop shares surged on the New York Stock Exchange – and then plummeted – after social media groups drove up its value.
The phenomenon has resurfaced this fall, partly due to the relaunch of an exchange-traded fund targeting meme stocks in New York in October. Those who are attracting buyers have also tried to ride the AI wave.
This causes the Swedish Financial Supervisory Authority to sound the alarm.
We want to warn small savers about the risks – it goes down just as quickly as it goes up, says Moa Langemark, consumer protection economist at FI.
Multi-million dollar losses
Nine out of ten Swedish investors who traded Gamestop shares during the hype were men up to the age of 30, FI has found.
"We could see that the vast majority of the money lost and the big winners were the online brokers that offer trading with this. For Swedish investors alone, the total loss was eight million dollars in connection with Gamestop," says Moa Langemark.
Young investors are particularly vulnerable.
Many young people tend to take more risk, many are impatient and want to get rich quickly. You see people on social media who claim to have become very rich on smart stock picks, but they lack the knowledge of both what it costs and how incredibly difficult it is to succeed in spotting a stock on a strong growth journey.
During the year, FI has also seen a number of pure pump-and-dump frauds emerge.
“Be critical of sources”
FI's advice is to only invest in companies and products that you have knowledge about.
Be critical of the source of advice on social media: it doesn't have to be true, there is a large element of fraud here. Don't believe what seems too good to be true and only invest in what you believe in long-term. Also be aware that it costs a lot of money to speculate, advises Moa Langemark.
FI has also engaged in dialogue with online brokers to ensure that they do enough to ensure that customers can make well-informed decisions and prevent fraud.
