In today’s Finshots, we tell you why some US stocks like Krispy Kreme and GoPro are suddenly flying high.

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The Story

Let’s rewind to early 2021. The stock market was buzzing from the pandemic boom, people had spare cash and a lot of free time, and Reddit was slowly turning into Wall Street.

At the centre of it all was GameStop — an old-school, brick-and-mortar store chain for buying video games. The kind of place no one really shops at anymore, thanks to digital platforms.

So obviously, the business was fading. Hedge fund managers knew it. So, they started betting against it by “shorting” GameStop’s stock — essentially borrowing it to sell at a high price, hoping to buy it back lower and pocket the difference.

But here’s the thing. If the stock price rises instead of falling, the short seller is in trouble. They have to buy the stock back at a higher price, taking a loss. 

So when too many people have shorted the stock, but the stock price starts rising rapidly, they all rush to buy it back at once to avoid bigger losses. That mad scramble drives the stock up even more. And that’s what you call a “short squeeze.” 

If that long winded explanation lost you, just remember this: A short squeeze occurs when many investors bet a stock’s price will fall, but the price shoots up instead.

That’s exactly what Redditors on /r/wallstreetbets (the subreddit where the community discusses their trades) triggered. They spotted the massive short positions by hedge fund managers, and fueled by frustration, memes, and a sense of rebellion, started buying the stock to create a short squeeze. And in doing so, GameStop’s stock jumped from $3 to nearly $480 in a matter of days.

Now, over four years later, that same meme market madness is back. 

Only this time, the names are different—Krispy Kreme, GoPro, Kohl’s, Opendoor Technologies. A donut chain, a camera maker, a department store, and a money-losing real estate app. On paper, they’re worlds apart. But zoom in, and you’ll find a common thread:

Weak fundamentals. Massive short interest. And sudden, unexplained rallies.

Take Opendoor, for instance. The company hasn’t seen a profit in three years. Its stock was languishing at $0.50. Then Eric Jackson, a hedge fund manager at EMJ Capital, tweeted that it could go as high as $82. That’s a staggering 16,300% upside potential!!!

And to be clear, the company hasn't seen a turnaround or a major change in fundamentals. But its stock price has, thanks to the above tweet that lit the spark, and traders—especially retail ones—reacted quickly, taking the price up to $2.50. Yup. A 400% increase, driven just by attention.

That’s proof that capital appreciation can come from pure social momentum. Call it meme investing, the wisdom of the crowd, or retail rebellion. Either way, it’s real, and it’s moving stock prices.

Because Opendoor wasn’t alone. Krispy Kreme, GoPro, and Kohl’s also saw their stocks rally over the past month.

Did any of them post blockbuster earnings? Nope. But did they have short positions on them? Yes, plenty. And that’s all it takes to trigger the meme crowd. Once they spot high short interest, it becomes the perfect setup for another squeeze.

Even fashion retail isn’t spared. American Eagle Outfitters spiked 4% in a day because actor Sydney Sweeney appeared in a brand campaign for the clothing retailer with the tagline “Sydney Sweeney has great jeans.” No new product, no financial update. Just a viral endorsement. And it drove enough FOMO to move a billion-dollar company’s stock.

Perhaps the rally was about sentiment. About the idea that the attention would translate into more sales, and that would justify the stock price rise later. So the trade isn’t based on value, it’s based on virality.

And this isn’t just a US thing. In India, meme investing has a different flavour: less Reddit, more Telegram.

Ever received a stock “tip” in a Telegram or WhatsApp group? Usually, it’s for an unheard-of company with little trading volume. And it’s likely a classic pump-and-dump scheme at work.

1. A few players quietly buy into a low-liquidity stock.
2. They start pushing the name in Telegram channels and WhatsApp groups, promising it will “hit upper circuit.”
3. New, unsuspecting retail investors follow the tip and pile in, not knowing that they’re pushing it up themselves. This further fuels their confirmation bias that taking the position was the right move.
4. Price rises quickly due to the sudden demand. Because their Telegram ‘guru’ had it right all along.
5. The original players exit at a profit, and the stock crashes.

And good luck tracing the operators. Most disappear with invalid phone numbers and deleted Telegram accounts. SEBI is even trying to crack it down by engaging directly with YouTube, Meta and Telegram to block unregistered finfluencers. But it’s like whack-a-mole. Shut one channel down, and another pops up tomorrow.

Still, whether it’s Reddit or Telegram, the playbook is the same.

Hype moves markets.

In some cases, like GameStop, it’s a movement. In others, it’s manipulation. But the line between the two is getting blurrier.

Memes grab attention, and attention turns into capital flows. Take GameStop. It used its meme surge to load up its balance sheet and pay off debt.

But for investors, it could more often than not be a trap. While the GameStop rally eventually unraveled, the stock tanked. Retail investors lost money and the institutions reloaded.

And that brings us to the question: Why is this meme wave making a comeback now?

Well, look around. US markets are hitting all-time highs. The Federal Reserve has paused rate hikes. Liquidity is back and risk appetite is up. The environment, in which self-directed traders, especially the online, meme-savvy ones, feel emboldened. Meme moments spread faster and gather more firepower. And before you know it, a struggling penny stock is the market’s new darling.

But for every meme stock that uses attention wisely, there are ten others where retail investors are left holding the bag.

Sure, speculation has always existed. It’s part of the market’s DNA. And that means internet hype will always find new ways to game the system. But your money doesn’t have to fuel someone else’s exit strategy, no?

So the next time you see a stock spike overnight, pause and ask yourself: Did the business improve? Or did the internet just get bored?

Because as they say, sometimes, the best way to double your money is to fold it and put it back in your pocket.

Until then…

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