Videogame retailer GameStop (GME) - Get GameStop Corp. Class A Report and movie-theater chain AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report firmed on Tuesday after the Securities and Exchange Commission issued a report on trading in the so-called meme stocks.
The report examined the roller-coaster trading of meme stocks in January. It put the kibosh on conspiracy theories circulating on the internet, but it also said market dynamics should be investigated.
Those dynamics include gamification of stock-trading apps, payment for order flow and short-selling.
GameStop of Grapevine, Texas, on Tuesday closed at $186.79, up 0.4%. It has skyrocketed by nearly a factor of 10 year to date and has given back 9% in the past month. Many investors and analysts say it’s still wildly overvalued.
AMC of Leawood, Kan., on Tuesday closed at $40.80, down 5.2%. It's up by a factor of 20 year-to-date but has eased 2% over the past month. Many investors and analysts maintain that it, too, is still vastly overvalued.
“The extreme volatility in meme stocks in January 2021 tested the capacity and resiliency of our securities markets in a way that few could have anticipated,” the SEC said in its report.
“At the same time, the trading in meme stocks during this time highlighted an important feature of U.S. securities markets in the 21st century: broad participation.”
Further, “People may disagree about the prospects of GameStop and the other meme stocks, but those disagreements are what should lead to price discovery rather than disruptions,” the SEC said.
It said areas that deserve study include:
· “Forces that may cause a brokerage to restrict trading.
· “Digital engagement practices and payment for order flow.
· “Trading in dark pools and through wholesalers.
· “Short-selling and market dynamics.”