This week will go down in market history as the return of Roaring Kitty. Keith Gill — known as Roaring Kitty on social media — the Massachusetts man credited with launching the GameStop (NYSE:GME) short squeeze of 2021, picked an interesting time to return to social media.
After a long hiatus, he shared an apparently hand-drawn photo on X of a man playing video games, launching a meme stock frenzy. Unsurprisingly, both GameStop and AMC Entertainment (NYSE:AMC) quickly surged. After a solid two-day rally, shares of both companies reversed course. And other companies that sometimes benefit from high retail investor interest didn’t even make it into the green.
If a meme stock frenzy can’t help a stock, it’s likely that nothing can.
This should serve to illustrate what poor investments most meme stocks truly are. Historically, piling money into them has been a great way to lose it. As InvestorPlace’s Eddie Pan reported:
“[Joining] a meme stock community is an extremely dangerous game. A meme stock community participant is likely to follow or be influenced by the broad investment decisions conveyed by the rest of the group, regardless of a stock’s financial health or risks. This is a classic example of groupthink, which is a psychological phenomenon that occurs when an individual aimlessly follows the actions of a group.”
That said, some meme stocks are worse investments than others, as the recent Roaring Kitty rally illustrates. A few losing stocks are still in a race to the bottom. Let’s take a closer look at a few companies that failed to break out of the red while GME and AMC were soaring.
Meta Materials (MMAT)
Some meme stocks just can’t capture any momentum and Meta Materials (NASDAQ:MMAT) is proof. Despite a quick burst in Tuesday trading, this functional materials company is still down more than 20% for the month. More worrisome is the fact that MMAT has plunged more than 75% over the past six months, falling from $11 per share to barely above $2.
That alone should be a reason for investors to disregard the company. But Meta Materials recently laid off 80% of its staff, which suggests that it is close to closing up shop.
In my opinion it is all too clear that MMAT is one of the top meme stocks to sell before it tanks even further.
Mullen Automotive (MULN)
Despite its growth over the past month, Mullen Automotive (NASDAQ:MULN) did not benefit from the Roaring Kitty rally at all.
Quite the opposite, in fact. MULN stock fell 8% on Wednesday and is down more than 20% for the past five trading days.
InvestorPlace contributor Alex Sirois believes that the company is on the verge of declaring bankruptcy, which wouldn’t be surprising, given its clear inability to put cars on the road.
“Mullen Automotive’s shares recently spiked in price. The reason for the spike is government subsidies from the state of California that have drastically reduced the effective price of its class 3 EV truck. The vehicle also qualifies for federal subsidies making it much more attractive. However, it remains difficult to depend on subsidies for success. Yes, those subsidies will entice buyers to consider Mullen’s vehicles in the immediate term. However, those subsidies have come and gone many times.”
Sunshine Biopharma (SBFM)
Sunshine Biopharma (NASDAQ:SBFM) has been in an unmistakable race to the bottom, falling almost 90% in just the past month.
Given how far it’s fallen, it seems a safe bet that SBFM is truly beyond help. A company shouldn’t have to fall 90% in one month in order to be placed on a list of meme stocks to sell. But since Sunshine can boast that impressive statistic, it isn’t surprising that even retail investors seem to have lost faith in it. There comes a time when even speculative traders cut their losses and in the case of SBFM stock, the losses are significant.
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On the date of publication, Samuel O’Brient did not have (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.
