SoFi, The Next Meme-Stock?

Sebastien Callebaut -

Reddit Has Found Its New King

Last month, SoFi Technologies went public via a SPAC backed by Chamath Palihapitiya. Today, senior strategist Ben Onatibia and analyst Giacomo Pierantoni said the stock is one that looks increasingly likely to grab some notoriety as comments about the company accounted for 20% of the activity on the Reddit Wall Street Bets forum in the last days.

The analysts said that the end of the post-merger lockup period and the rise in short interest are the two main arguments amongst Redditors to buy the stock.

“Travis Rehl, the founder of Reddit investing-tracker HypeEquity, said in a morning note that many retail investors looking to hold SoFi long-term are comparing it to the next Square or PayPal.” by Natasha Dailey for Business Insider

The company recently announced that it would allow users to gain access to the initial public offerings of four Palihapitiya-backed Blank Check companies. Interestingly, some of Palihapitiya’s SPACs have become a must with retail investors and earned the MEME-stock status (e.g. Virgin Galactic and Clover Health).

BENCHMARK’S TAKE

  • Buying a stock to engineer a short squeeze isn’t an uncommon event. However, the size and duration of recent attempts are staggering
  • While there may be little value to meme stocks, prudent investors could still listen to the signals these are sending
  • These are the same as in February 2021: current price action suggests that the casino is open and retail investors are flocking in
  • We therefore believe that prudent investors should be careful when buying stocks with high retail ownership
  • When the casino cool downs, these stocks may be the hardest hit

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Brett Jordan on Unsplash.