Ashes to Ashes, Dust to Dust, Fad to Fad

Editors’ Note: MarketMinder doesn’t make individual security recommendations. The below are incidental to the broader theme we seek to highlight.

As investor sentiment improved this year, it brought all the standard goodies. AI hype, natch. Bubble fears, as many mistake bourgeoning optimism for euphoria. And, of course, the return of “meme stocks”—penny stocks that get heaps of attention on social media, booming (and busting) more on online trend following than fundamentals. It seems there is a new meme stock in town today, and it hints at how human quirks and markets intersect.

Naturally, this is Beyond Meat, which The Wall Street Journal reports boomed 86% intraday Wednesday, then coughed it all up.^[i] The coverage called it the newest meme stock, and a quick scroll through the Wall Street Bets subreddit showed the funny folks there posting memes about YOLOing^[ii] and holding on through the wild ride. I am always skeptical as to whether these memes reflect actual investor behavior or whether they are a giant communal wink at traditional news outlets, but everyone can make their own judgments. And even if people aren’t plowing in their whole portfolios, as the meme stock caricatures say they do, some of them are buying.^[iii]

At any rate, Beyond Meat is now a meme, it is in a meme stock ETF and its daily stock chart from Wednesday looks like the Burj Khalifa, so it is a meme stock. Congratulations!

But also, what a book end! Six-plus years ago, Beyond Meat was a faddish IPO. Now it is a sad fad. So … is this going to become the normal lifecycle for overhyped IPOs? Enter the world as a fad, leave after a last-gasp fad?

Beyond Meat’s heyday was pre-COVID, so you might not remember how loudly that particular hype train choo-chooed. Talk about “plant-based meat” was everywhere. It would supposedly give vegans and vegetarians the same delights steak gives us carnivores. We carnivores would purportedly be wowed into submission, surrendering our beef in the name of saving the planet, and we wouldn’t care because it tasted the same. When Beyond Meat became the first player to go public, its CEO called it “a time of unlimited growth.”^[iv] The underwriters had to raise the IPO price and share count at the last minute because demand was off the charts.^[v] Even with that, first-day returns topped 150%, at that time the third-largest first-day boom in a decade.^[vi] The price roughly tripled from there over the next two and a half months as people chased heat.^[vii] It then fell toward its first-day closing price as the year wound down, but the hot debut was still enough for industry publication Food Dive to name Beyond Meat its 2019 “Disruptor of the Year.”^[viii]

This was all classic fad behavior, hype over substance. As we pointed out at the time, Beyond Meat was unprofitable, and its path to long-term viability looked questionable. People who followed vegan, vegetarian and plant-based diets were a tiny sliver of the US and global population, and it was never clear that these folks actually wanted the taste and feel of meat. And while converting carnivores was the larger aim, we meat eaters quickly clocked all the palm oil, extra calories and overall ultra-processed nature of the products. Plant-based meat eventually fizzled, as did Beyond Meat’s stock. It spent the next several years sliding gradually (with some false dawns along the way) from its high of 234.9 on July 26, 2019 to 52 cents last week.^[ix]

And now it has gone from hot to not to meme stock.

So, again, is this the lifecycle now? Is meme stockhood the last fun stop on the longer journey from IPO to delisting? GoPro, another 2025 meme stock, was a red-hot IPO in 2014. Opendoor was one of the leading lights of 2020 – 2021’s boom in special-purpose acquisition companies (SPACs), basically low-paperwork backdoor IPOs. BlackBerry, one of the original meme stocks, was a big Canadian dot-com IPO in the late 1990s. And Snapchat parent company Snap, which flirted with meme status earlier this year, went public in 2017 with bigtime hype (and quickly flopped).

Five stocks out of thousands globally is an interesting observation, not a trend. But if this becomes the way of things, perhaps it says more about investors as people than about fundamental marketplace changes. It all seems like a play on nostalgia, kind of a hey remember when this was a thing? Only instead of bidding up vintage CareBears and Ken Griffey Jr.’s rookie card^[x] on eBay, they bid up the familiar hot stocks of old. Take the old bike out for one last ride, buy your favorite childhood toy at the flea market, that sort of thing.

Look, maybe I am naïve, but it doesn’t seem much more complicated than that. Few likely go into a meme stock thinking “this will set my finances for life.” And it doesn’t seem like pure gambling, no matter how much pearl clutching there is about “gamification” and addictive apps with their dopamine bursts. Gambling can be a real and tragic problem, of course. But the so-called meme stock crowd has always been more sophisticated and knowledgeable about markets than mainstream coverage makes them out to be. Mostly, they seem like deep-value investors who like to have a laugh and miss the things of their youth.

Even the meme stocks that didn’t start as infamous hotshot IPOs have that nostalgic whiff. GameStop and its earlier incarnations (Software Etc. and Funcoland) were required stops at any mall outing in the 1990s. Every American in my generation basically grew up at Blockbuster. American Eagle jeans? Those were what you bought when you were fourteen, thought Levi’s were boring and didn’t know much about denim. Krispy Kreme donuts? Say the name and my teeth hurt at the memory of all those runs to the Van Nuys location 25 years ago.

Basically then, this all shows people are people. Remember when we were all flying high before COVID and we didn’t have to worry about AI destroying entry-level jobs and fake meat was the future? Man, I want another taste of that. Nostalgia has always been one of the great human temptations, seducing us with rose-tinted visions of the past to keep us from living in the moment and moving forward. See a hot stock from the good old days trading for a penny, and it is pretty darned natural to think dang, those were the days, hey look it is cheap might as well, just for funsies, you never know. Maybe in some indeterminate number of years, if OpenAI goes public, it will eventually be a meme stock pumped by folks nostalgic for the large language model boom.

That isn’t investment advice. Nor is it wise. But it is core human behavior, and markets are the sum total of core human behavior. We often say ‘round here that a chief principle to understand in markets is this: Human behavioral traits don’t change fast enough to matter to markets. This seems like a case-in-point. Markets aren’t weirder, more fragile, more dangerous or more gambly than they used to be. Oddly, in the age of algorithms and machine-driven trading, they simply seem more human. Comforting, no?