It’s no secret that unstable companies often attract the attention of retail investors. After all, Wall Street loves to bet against companies with little-to-no growth prospects. That’s exactly what entices retail traders seeking the next big short squeeze to start pouring money into these companies. But as we’ve learned over the past year, that practice also leads to meme stocks with even more reason to bet against them. Earlier this month, Tupperware Brands (NYSE:TUP) surged more than 500% on short squeeze momentum. After peaking at nearly $6 per share, TUP stock is already back down to the $3 level.
Meme stock investors were dealt another crushing blow recently, this time from the legal system. Traders attempted to sue Robinhood (NYSE:HOOD) for halting trading of meme stocks during the GameStop (NYSE:GME) squeeze of 2021. As InvestorPlace’s Eddie Pan reports, “the trading platform was handed a major victory after the 11th U.S. Circuit Court of Appeals in Atlanta ruled 3-0 in its favor regarding the trading restriction of 13 meme stocks.”
The retail investor crowd is prone to crying foul when things don’t go their way. We saw it when Robinhood restricted trading access in 2021. But a more recent example happened in late 2022, when the Financial Industry Regulatory Authority (FINRA) halted trading of MMTLP — the preferred shares of Meta Materials (NASDAQ:MMAT) — prior to a spinoff.
The lack of legal action that results from these outcries should highlight something important; betting on troubled companies isn’t a good investment strategy. Still, some meme stocks are worse bets than others.
The Worst Meme Stocks: Meta Materials (MMAT)
First up on this list of the worst meme stocks is Meta Materials. This functional materials company didn’t get much attention until last year when the MMTLP scandal thrust it into the spotlight. Since then, though, it has stood out as a struggling company with a highly questionable past.
Both Meta Materials’ management and investors have raised concerns about naked short selling, leading to Meta hiring a law firm to investigate the matter. But trying to validate these claims hasn’t done much to boost MMAT stock, which is down almost 70% for the past six months. It’s also more likely that these concerned investors have fallen victim to a groupthink mentality rather than anything else.
As it turns out, this company also has legal problems of its own. Back in July, the U.S. Securities and Exchange Commission (8-K filing, the SEC has recommended that a civil enforcement action be filed against Meta Materials. Additionally, the possibility of being delisted from the Nasdaq looms large for MMAT. Given its miserable performance, that certainly seems like a possibility. MMTLP is gone and retail investors can’t resurrect MMAT stock.) issued a Wells Notice. According to an
Genius Group (GNS)
Yesterday, this education technology penny stock surged on news of a pending spinoff. Today, however, shares are back in the red as reality sets back in.
Genius Group (NYSEMKT:GNS) stock is popular with the same crowd that believes in the naked shorting allegations regarding MMAT and MMTLP. Genius CEO Roger Hamilton has tweeted about the situation with FINRA on multiple occasions. But like Meta Materials, Genius Group is a highly suspect meme stock that has spent the past six months shedding most of its value. That may be because, as InvestorPlace contributor Ian Bezek reports, Genius’ financials are anything but robust:
“The firm generated just $18.2 million of revenues last year and continues to lose money. The SEC also recently sent GNS a warning letter for breaching Section 401 code, which pertains to the disclosure of information. Let’s just say it’s not smart to invest in GNS stock given its poor operational results, SEC issue, and history of having a boom-and-bust stock chart.”
Investors shouldn’t need more reason than that to avoid GNS stock. But if they do, they should also consider its links to Meta Materials, a company that trades at even lower levels and appears even less stable.
The Worst Meme Stocks: Mullen Automotive (MULN)
The examples of why no one should bet on MULN stock are numerous, but a hard to miss one is the fact that shares are down more than 98% year-to-date (YTD). The company recently engineered a reverse stock split, but that hasn’t helped share prices much. The stock is still struggling to remain above the $1 mark.
Like MMAT stock, MULN has been constantly plagued by the threat of losing its spot on the Nasdaq. Its inability to consistently trade above $1 makes this a valid concern. But Mullen also has a history of burning through cash without actually putting vehicles on the road. InvestorPlace contributor Muslim Farooque argues that the company’s future is highly uncertain as the stock flashes warning signals. Meanwhile, Louis Navellier rates MULN as an “F” in his Portfolio Grader.
There are plenty of meme stocks that investors should ditch, but it’s especially hard to ignore the bearish case against Mullen.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.