The rallies in Reddit penny stocks driven by retail investors who congregate on r/WallStreetBets and other finance-related subreddits have not been all bad. While it has been strange, and at times shocking, the Reddit-fueled rallies benefitted some companies whose stocks were pushed to extreme and unsustainable heights.
Many small-capitalized companies whose shares were classified as penny stocks and struggled for attention suddenly found themselves thrust into the limelight. Legitimate media sites were suddenly writing about these companies and their products, investors were discussing their stocks in chat rooms, and the elevated share price enabled them to raise additional funds and stay afloat during the pandemic. While the attention may have been short-lived, it nevertheless revived many fledgling and forgotten stocks.
Here are four Reddit penny stocks that profited from the attention they got in recent months.
Reddit Penny Stocks: Genius Brands (GNUS)
If nothing else, entertainment company Genius Brands has benefitted from the publicity it attracted as its stock was targeted by Reddit investors. The company, which is largely focused on educational programs for toddlers, has seen its brand and name recognition strengthen due to the media coverage it received after its stock soared more than 60% in March. As a result, Genius Brands has been able to attract talent to its Kartoon Channel streaming platform, including actor Arnold Schwarzenegger and former basketball star Shaquille O’Neal.
Additionally, Genius Brands has taken advantage of the sharp move higher in its share price and issued new stock. The company issued 37.4 million more shares of its common stock at a price of $1.55 in a direct offering that raised $58 million for the company. While investors don’t typically like it when companies dilute their shares by issuing more stock, the move will help fund genius Brands aggressive expansion plans. After peaking just above $3 a share due to a Reddit short-squeeze, GNUS stock is now trading at $1.70 per share.
AMC (AMC)
Near-bankrupt movie theatre chain AMC Entertainment got a reprieve earlier this year when its stock landed on the radar of Reddit investors. In no time, AMC stock shot up from just $2 a share to a high of $20.36. The stock has yo-yo’d since the end of January, dropping as low as $5.50 a share and then back up to $14.40 and back down. AMC stock currently trades for $10.91. It’s been quite a ride for the company that has been pushed to the edge of bankruptcy as the Covid-19 pandemic led to the prolonged closure of more than 900 movie theatres.
However, AMC managed to avoid bankruptcy due in large part to the $917 million of cash it received from investors who grabbed stock during the Reddit rally. The company is by no means out of the woods, but with the economy reopening and its theaters starting to open to the public again, the worst may now be over for AMC and its shareholders.
While streaming services have come on strong during the pandemic, there does appear to be pent-up demand for the public to again crowd into darkened movie theatres for the shared experience of watching films together.
Zomedica (ZOM)
Animal health company Zomedica saw its stock rocket higher than most when it was caught in a short-squeeze by Reddit investors in the first two months of this year.
At one point in January, ZOM stock rose a mind-boggling 671%. The stock is now down to $1.14. However, Zomedica took full advantage of the Reddit rally and raised $200 million through a secondary share offering held in mid-February. The company has said it plans to use the proceeds from the stock sale to beef up its sales team.
The short-squeeze aside, there are things to like about Zomedica and its stock. The company has a proprietary technology called “Truforma” that simplifies diagnostic testing in cats and dogs, a market that, the company claims, could be worth $5 billion by 2027. Zomedica announced in mid-March the first commercial sale of its Truforma platform to a New York-based animal hospital. And, thanks largely to its February stock offering, the company now has enough cash on hand to carry it through to when it is able to ramp-up sales of the Truforma platform.
Investors and others certainly weren’t talking about Zomedica or its animal diagnostic technology before the Reddit squeeze.
Reddit Penny Stocks: BlackBerry (BB)
It was clear from the selling of BB stock by BlackBerry executives that the company benefitted when it was squeezed by Reddit traders earlier this year. The Canadian technology company’s Chief Marketing Officer sold nearly $1 million worth of BlackBerry stock, and its Chief Financial Officer sold nearly $430,000 of the stock on Jan. 20, 2021 when the share price surpassed $15. The company executives can be forgiven for unloading their shares, given that it was the biggest rally in BlackBerry’s stock in more than 20 years.
The enterprise software firm that specializes in the Internet of Things (IoT) saw its stock ascend from $8 a share up to a peak of $28.77 in late January before making a round trip and ending up back at its current level of $8.85 per share. It might not be long before BlackBerry is again trading in penny stock territory at under $5 a share, as it was last November.
Given the stock’s decline over the past few months, the company executives looked smart to unload their holdings as retail investors on WallStreetBets pushed the price up to unreasonable levels.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
