Legacy memes such as AMC (NYSE:AMC) stock and GameStop (NYSE:GME) stock may just have gotten another opportunity to defy gravity.
For the past few weeks, it’s been all crypto, crypto, crypto. Activity in many actively traded stocks has declined as folks have turned their attention to Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD), Solana (CCC:SOL-USD), and the various dog-related tokens.
With crypto surging, why bother with stocks? However, a new special purpose acquisition company (SPAC) soared 500% Thursday, reminding traders that meme stocks still have potential.
Last week, a little-known SPAC, Digital World Acquisition Corp (NYSE:DWAC), made a big move. Digital World Acquisition announced that it will be buying former President Trump’s newly-formed social media company, the Trump Media & Technology Group (TMTG).
TMTG’s most exciting plan is to launch a social network, Truth Social, which intends to offer a rival to Twitter (NYSE:TWTR) that is more welcoming to conservative points of view.
DWAC stock opened at $10, but surged to the $70s on Thursday. On Friday, it made a further rally, topping $150 at one point. Here’s why this is good news for AMC stock and other such older meme plays.
Huge Trading Volume
On Thursday, DWAC stock saw more than 500 million shares trade hands. That’s an absolutely gigantic number. For context, the next most actively traded stocks on the day were Sundial Growers (NASDAQ:SNDL) and Camber Energy (NYSEARCA:CEI), which traded 320 million and 140 million shares, respectively.
Of course, DWAC’s trading volume is even more impressive considering its high share price compared to Sundial and Camber which are penny stocks.
Put another way, an absolutely gigantic amount of money flooded into this new company. That gave a major boost to speculative stocks more generally.
Prices rallied for various other SPACs and SPAC warrants. After a difficult fall for meme stock traders, there were signs of life. This might be just the thing to make SPACs great again. If it is, that should give a tailwind to AMC stock and other popular meme names as well.
Cross-Marketing for Other Meme Stocks
Perhaps the best angle of this for AMC is the sort of people who are most likely buy DWAC stock. They are upset with the traditional media. They have some alternative views about controversial social issues. This sort of thinking combines well with the anti-Wall Street anti-establishment rhetoric out of the AMC community.
The AMC stock bulls believe they were victimized by Robinhood (NASDAQ:HOOD) and financial firms in January when trading was halted in the meme stock names.
They see an organized pattern of behavior between various actors such as Melvin Capital and Citadel to manipulate the prices of GameStop, AMC, and other battleground securities. This sort of thinking naturally lines up with many of the beliefs of the people that would be most interested in Trump’s media company.
There’s a strong anti-establishment streak in the meme stock community. The DWAC stock phenomenon is the best marketing for meme trading that we’ve seen in months.
We’re already watching this play out. TaraBull is a prominent AMC stock supporter with nearly 50,000 Twitter followers.
She hosts frequent call-in shows to talk about AMC stock. On Thursday, she went on a widely-listened-to Twitter Spaces event to talk about both DWAC and AMC stocks. For newer participants that are just finding about meme trading thanks to Trump’s SPAC, this is a golden opportunity to discover other favorites such as AMC and GameStop.
AMC Stock Verdict
The long-term business outlook for AMC remains poor. Box office numbers have been bad to terrible this year. AMC’s financials are weak and show little sign of intermediate-term improvement.
If you want a fundamental reason to own AMC stock, I’ve got nothing to offer you.
However, few people own AMC because they actually think the economics behind it are compelling. Rather, AMC is an investment in the meme stock community, the spirit of rising up against Wall Street and taking on the fat cats.
It’s an appeal based on emotion rather than data or financial logic. So far, bears that have bet against AMC, GameStop, or other such stocks have gotten run over. An economics professor would tell you it makes little sense, but it is happening anyway.
Adding a high-profile Trump SPAC/meme stock to the mix can only help AMC. It will bring more anti-establishment folks with an ax to grind to the stock market. Once they finish taking their positions in DWAC stock, they’ll see what else is out there.
When they discover the AMC community, it should help the movie theater company expand its shareholder base further and give support to the share price.
On the date of publication, Ian Bezek held a bullish position in AMC stock via sold December $15 strike AMC naked put options. He held no direct position in AMC common stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
