- Koss stock gains 143% on Wednesday out of nowhere.
- KOSS stock rallies as much as 330% despite lack of catalysts.
- GME and AMC stocks featured no volatility.
- Stock is thought to be benefiting from a short squeeze.
Koss, the maker of headphones and a noted meme stock, transcended the market on Wednesday, and no one really knows why.
Shares of Koss closed up 143.8% on the day but were up about 330% at one point. What’s more, other meme stocks like GameStop (GME), AMC Entertainment (AMC) and Chewy (CHWY) were rather complacent in the same session. Normally, meme stocks tend to exhibit group rallies.
The S&P 500 and the NASDAQ both witnessed new all-time highs in Wednesday's shortened session after the ADP Employment Change report showed fewer new jobs in the US economy than expected. Coupled with Initial Jobless Claims arriving slightly above consensus, the market made the guess that the slowing labor market is sure to force the Federal Reserve's (Fed) hand into trimming interest rates at its September meeting. Lower interest rates are a boon for equities.
The stock market will be closed on Thursday for the July 4 Independence Day. Shares of KOSS gained another 17% in the postmarket on Wednesday.
Koss stock news
Social media was awash with rumors about the Koss stock rally. Some thought GME CEO Ryan Cohen might be buying up shares. Another common idea was Mr. Roaring Kitty himself, Keith Gill, who launched the meme stock movement back in 2021.
Many found the humor in the rally, which reached a high of $18.73 or a 330% gain just after noon.
Could GameStop itself be interested in acquiring Koss for its manufacturing capabilities? One trader thought so:
Another online watcher noticed the unusual fact that other meme stocks were not following suit.
Meme stocks FAQs
Meme stocks are stocks favored by retail traders – but not by professional or institutional traders – that grow popular through its backers publishing memes on social media websites to win converts. Images or GIFs are typically used to transmit some type of excitement, committment or comedy regarding investment in the stock. These stocks normally are beaten down names that appear to have an uncertain or dour future based on falling sales figures or rising losses. Interest in these names normally comes from either belief in a turnaround story or its heavy short ratio.
Online investing forums like Reddit’s r/WallStreetBets are known to be breeding grounds for meme stocks. Normally, some small group of posters begin making memes of a stock they are buying. If the argument behind it is cogent or even just funny, the memes may provoke other retail investors to jump aboard. Interestingly, the merits of a stock are normally immaterial to it becoming a popular meme stock other than it being abandoned by the wider market and thus cheap. Stocks with high short ratios are usually likely to become meme stocks, because the nature of the argument for investing in the stock is that it can be the subject of a short squeeze.
A short squeeze is when investors swiftly buy up the shares of a heavily-shorted stock. Because the stock is heavily shorted, there is a dearth of available shares to purchase. This allows smaller volumes of buying to push the stock’s price up more easily. Since the share price suddenly rises, short-sellers need to purchase the stock to close out their short positions. This rapid buying and closing of short positions produces an unusually low level of supply that causes the price of the stock to rise rapidly. This type of short squeeze was the result of the first meme stock craze regarding GameStop.
Besides GameStop – the ur-meme stock – there have been a number of other meme stocks. Two of the most popular are AMC Entertainment and Bed Bath & Beyond. AMC CEO Adam Aron used the popularity of AMC shares among the retail class to effect a secondary offering that raised enough money to stave off bankruptcy during the 2020-2021 pandemic. Bed Bath & Beyond saw a flurry of volatile trading but eventually went bankrupt in April 2023.
Koss stock chart
Outside of its midday candle, Koss stock exhibited higher lows throughout the day. This would seem to lend itself to sustained demand rather than a pump-and-dump scheme. The best guess would be that once the US stock market reopens on Friday, shares of KOSS will continue their advance no matter how Friday's Nonfarm Payrolls report reads.
KOSS 15-minute stock chart
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