Trump, SPAC, Stonks, and memes!

Lately, we’ve been seeing something truly perplexing in the world of finance. It largely began from January end, or more specifically with the GameStop saga. A little context about GameStop, it’s a traditional retailer that dabbles with selling video games. With the pandemic, as the world went digital, the company that had an entire physical infrastructure had to go through a lot and GameStop was no exception.  Consequently, a lot of institutional investors (hedge funds), shorted (sold) the stock but then an army of retail investors congregated on Reddit to bet against the institutions!

New world

We all have moved on & come a long way, so the list of notoriously known as “meme stocks” also expanded. We now have AMC, cryptocurrencies like Dogecoin, Shiba Inu, etc. Now the latest entrant is Donald Trump’s social media platform “Truth Social”. One cue of meme stock is, they have a parabolic rise and an equally hard fall. If I need to put the logic behind these incidents, it is that the difference between finance and social media is gradually fading.

Money becoming more social

If you look at the fundamentals of Trump’s media platform, the cracks are evident:

. The first version of the product is not out yet.

. The social media space, in general, has matured

. The management is not competent enough

. It’s severely underfunded

Trump himself is not putting any cash in the business and relying on the SPAC (Special Purpose Acquisition Company) i.e., the company that will take Trump’s platform public, Digital World Acquisition.

Crazy times

One thing which is now unsurprising to everyone is we’re living in crazy times. The only thing that we know about Truth Social is the mere name of it.  Once the information about Trump’s social media platform & streaming service went out, Trump’s memes flooded on the internet which led to the surge in its stock price from $10 to $94, almost a 900%+ rise! Just think about it, inventing memes gives you a mind-boggling 900% return.

Joke > Logic

There’s a common saying that markets are efficient, markets know everything but that might not be correct. Markets might not be as efficient as we think them to be. Shiba Inu has made millionaires out of those people who study and understand memes to the fullest rather than any fundamentals such as sales, profits, etc.

Conclusion

Maybe this is just the tip of the iceberg concerning what’s coming ahead. As the world spends more time on social media, memes’ influence is going to rise because memes essentially are on the way to becoming the language of the internet and as finance gets more social, it’s going to get more memetic! So, many cases like Truth Social might be around the corner.  What do you think?

Manvinder

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