What happened
Easy come, easy go. Meme stock volatility was on display again today as Newegg Commerce (NEGG 3.39%) had tumbling 24% at noon on no news, one day after it gained meme stock status as its shares surged 160% at one point.
Also falling sharply today was Pop Culture Group (CPOP 4.42%), a Chinese company that just went public last week. It was also down 24% at midday.
Image source: Getty Images.
So what
Newegg's meteoric rise was said to be due to the difficulty in finding option contracts to buy on the stock on their first day of trading. Their scarcity caused the stock price to rise.
As much as analysts like Newegg's new custom PC builds, the massive run-up in its stock -- some 500% this week and over 1,500% year to date -- is not warranted. Even if internet chat rooms have embraced Newegg, there still needs to be some fundamental underpinning to its business to justify that valuation.
Pop Culture -- a company that seeks to promote hip-hop culture through concerts and other events -- also had a huge jump in its stock upon its issue, but has since lost 75% of its value from its highs.
Now what
Stocks like these are going to be volatile. For example, the original meme stock, GameStop (GME 1.07%), even saw its shares tumble almost 6% in morning trading today before clawing their way higher, and are now up by about a half-percent.
The businesses of these new so-called meme stocks just might be viable. GameStop certainly seems to still have a future after being written off for dead last year. But unlike the video game retailer, Newegg and Pop Culture still need to prove they're more than a blip on the screen.
