Shorting S&P 500 stocks is risky. But it's downright dangerous when you're betting against soaring meme stocks.
That doesn't seem to stop some brazen investors from trying, though.
Short interest on a dozen stocks in the Roundhill Meme Stock ETF — including Carvana, Upstart Holdings and AMC Entertainment — is now a lofty 10% of shares outstanding, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's a lofty level. It's roughly five times higher than the average short interest on S&P 500 stocks.
But that's stinging now that investors seem willing to buy anything with a ticker symbol. Keep in mind that shorts lose money when stocks they bet against go up. The 25 stocks in the meme ETF are up an average of 133% this year.
Ouch.
Shorting The Memes
Shorts who piled into online car seller Carvana are getting pounded. It's the most heavily shorted stock in the meme ETF. Nearly 39% of its shares outstanding are in the hands of shorts.
But rather than crashing like it did in 2022, Carvana is on a tear now. Shares are up 831% to 44.14 just this year. That makes the S&P 500 look like it's standing still with its 19.2% gain this year.
It's a bit of a head-scratcher for many traditional growth stock investors. The stock is already roughly 10% overvalued vs. analysts' 12-month price targets. They rate the stock a "hold" on average. Meanwhile, the company is expected to lose money annually until 2026.
Other Big Shorts In Memes
Analysts also hate Upstart Holdings, an AI-enabled lending platform used by banks and credit unions. They rate the stock underperform and think the shares are 70% overvalued. Short sellers agree. They control more than 32% of the outstanding shares.
But the market doesn't seem to care. Shares are up 386% this year anyway. And that's despite the company being on track to lose an adjusted $46 million, or 51 cents a share, this year.
And even news of a blockbuster weekend for movies isn't scaring away the shorts on theater chain AMC. More than 28% of the company's shares are in short sellers' hands. Analysts are on the shorts' side, calling the stock (which trades for 5.14 a share) only worth 2.27, or 50% less. Meanwhile, the company is expected to lose money every year until at least 2027.
Risks loom large, too. The company lost a court decision, making cash even tighter. Meanwhile, a strike by Hollywood writers and actors could choke the supply of new blockbusters. "AMC's focus split between stellar box office and unfavorable court ruling," wrote Wedbush analyst Alicia Reese.
But meme investors don't care. And they're the ones making money now. Shares of AMC are up 26% this year — outperforming the S&P 500.
Most Shorted Meme Stocks
Most Roundhill Meme ETF stocks are rallying anyway
| Company | Ticker | YTD change | Short interest % | Sector |
|---|---|---|---|---|
| Carvana | 831.1% | 39.0% | Consumer Discretionary | |
| Upstart Holdings | 386.3 | 32.5 | Financials | |
| AMC Entertainment | 26.3 | 28.6 | Communication Services | |
| Marathon Digital Holdings | 377.9 | 24.8 | Information Technology | |
| Enovix | 53.5 | 21.7 | Industrials | |
| Nikola | -6.3 | 18.0 | Industrials | |
| GameStop | 23.7 | 17.2 | Consumer Discretionary | |
| Riot Platforms | 434.8 | 16.0 | Information Technology | |
| Coinbase Global | 178.7 | 15.4 | Financials | |
| SoFi Technologies | 102.8 | 13.1 | Financials | |
| Affirm Holdings | 82.8 | 12.7 | Financials | |
| Peloton Interactive | 7.0 | 11.4 | Consumer Discretionary |
