If you’re on the internet (which you are if you’re reading this) and you’ve got an interest in investing, then chances are you’ve come across the latest ‘investment’ term to be making the rounds: meme stock. And whilst its use has been widespread, you might currently be the kid at the back of the class with no idea about what’s going on, but is too scared to raise their hand and ask the simple question: what is a meme stock?
Let’s tackle that first.
What is a meme stock?
As with most internet-based things, the idea of a meme stock was birthed on social media – with Reddit being the source on this occasion. Put simply, a meme stock is a stock that gains a huge amount of popularity with retail investors in a relatively short space of time. The stock is made to go viral through overhype on social media, rather than increasing in volume based on how well the company performs. A meme stock has nothing to do with company profit margins, but a lot to do with getting to the front page of Reddit or trending on Twitter. It’s for this reason that many of these stocks become overvalued with prices hiking up in a short amount of time.
As you can imagine, the appeal of being an early buyer of undervalued stocks to cash-in shortly after buying peaks is immense. Just this past January, Reddit’s WallStreetBets community favourite GameStop was priced at $17.25 which in a matter of days peaked at $147.98 after being spurred on by online hype. AMC stock also benefited from a meme stock surge with, not one, but two waves of the frenzy and is more than 2000% up year-to-date. Sounds incredibly tempting, right?
So, what are people’s bets on IronNet becoming the next meme stock?
Since meme stock share prices aren’t based on the company’s underlying value, but on social media interest, there isn’t an easy way to predict what’s going to rise in popularity next. What you can do, however, is keep your eye out for companies in expanding markets. Cybersecurity, for example, is vastly expanding with experts expecting the sector to grow at a 9.7% compound annual rate in the next five years. With cybercriminals becoming more sophisticated by the day (hello Poly Network Hack), it’s no surprise there’s a huge demand for companies that can deliver effective cyber security solutions. And with that, a huge interest from those on the lookout for new stocks.
Recently under the beady eye of retail investors is IronNet, a cyber defense company that claims to be transforming cybersecurity through collective defiance. Using AI technologies, IronNet’s Collective Defense Platform “analyzes threat detections across the community to identify broad attack patterns and provides anonymized intelligence back to all community members in real-time, giving all members early insight into potential incoming attacks.”
With a product that’s likely to be in high demand, you can see why IronNet has been pinned as a popular meme stock choice that’s made the rounds of several Reddit discussions. In early September, shares in the cybersecurity company surged close to 50% and it was marked as a potential candidate for a ‘gamma squeeze,’ but with H1 revenues $2.5m below last year’s, I think it’s unlikely that IronNet will become the next meme stock many were hoping for. Perhaps one for long-term investors instead?
Could Arqit be next in line instead?
Fortunately, there are other cybersecurity companies out there with potential. Recently, I’ve had my eye on Arqit, a UK-based quantum encryption company, who’s been publicly traded for a similar amount of time as IronNet. What’s so interesting about Arqit? Well, it supplies a unique quantum encryption Platform-as-a-Service that makes the communications links of any networked device secure against current and future forms of attack – even from a quantum computer. Yes, that’s right. Not only will their product protect you now, but it’s also future proofed for the looming quantum threat.
And it’s not just me that’s interested in Arqit. They already have an impressive client base including BT, Verizon, Honeywell, Notion Capital, Juniper Networks and even the American and British governments. If that wasn’t enough, there was a 46% surge in just five days at the end of last month following the announcement of a partnership with Juniper Networks.
Sounds like a pretty safe bet for your investments, right? In my opinion, investing in both IronNet and Arqit for the medium to long-term is worth it. Having said that, Arqit does seem to be the better candidate as a potential meme stock should the Reddit crowd deem it worthy. Either way, keep your eyes peeled!