Trading IPO Meme Stocks | Podcast Episode #477

0:00
Hey everybody. This is Ryan Mallory with shareplanner.com’s.

0:02
Swing Trading the Stock Market. In today’s episode, I’m going to talk about trading meme stock, IPO’S.

0:09
Yeah, that’s a mouthful. And I have talked about IPO’S in the past, but I feel like this is a little bit more in a, in a specific niche of IPO trading. But what we’ve seen over the course of this past week and Newsmax stock symbol NMAX has been absolutely nuts and people are trading the stock and I have absolutely no earthly clue as to why. Give you a little bit of background, the stock debuted on Monday at $10 a share.

0:38
It opened the day at $14.00 a share. That’s 40% higher than where it IPO that. And within one minute of trading, it was at $15 a share. So within one minute of its opening price, probably before you could even get a order filled, it was already trading up 50% higher than where it IPO that. So no matter what, you’re chasing the stock at this point, and I know what you’re going to say.

1:00
Well, Ryan, did you see how much it went up? Yes, I did, but you’re still chasing.

1:03
Sometimes you do get lucky with chasing, but it’s still chasing. So it goes from $14.00 where it opens up at, remember $10 at the IPO and goes over the course of the next two days goes as high as $265 a share. That’s a 2500% increase on the stock.

1:25
Absolutely ludicrous. However, over the course of the next day, it drops 57% from its all time highs, which is really only, you know, course of three trading sessions. But nonetheless, it’s all time highs or, you know, whatever you want to call it, 2 day highs, still the same thing, right?

1:45
Or three day highs, but it goes all the way back down 116% or $116.

1:52
Now I know what a lot of people are going to say they’re going to be like, well, and, and this is literally some of the comments that I’ve gotten on this when I’ve criticized, you know, trying to trade this thing and not being able to manage the risk. He’s like, yeah, it’s, it’s only down 57%, but it has rally 2500%.

2:07
I’ll take 57% for for 2500% every day of the week. Well, yeah, I mean, in the perfect world, I, you know, who wouldn’t?

2:14
But that 57% represents 1500% of that 2500% move. So you’re not just talking about, you know, oh, you know, 2500 -, 57% and you’re still up 24143%.

2:30
No, that’s not how it works. You’re, you’re down a significant amount, especially if you didn’t get in on that first day or in those first few minutes of it starting to trade, which most people wouldn’t. And So what ends up happening with these IPO’S is that the, the street, the people who are in it on the, on the, whether it’s through the IPO or early on. And I don’t know what the restrictions are selling it, but in general, people that have the money that are making the money, they’re offloading their shares and depending on you, the retail crowd to gobble this stuff up so that they can get out at a much higher price.

3:06
So what I want to do in this podcast episode is just talk about the, the, the, the traps that come with getting into these IPO’S.

3:15
And I’m, I’ve been getting a lot of emails and, and texts about it, like people wanting to both go long on the stock and go short on the stock.

3:22
And both ideas are a bad idea. All right. So the crowd that, that wants to be contrary to this is saying, OK, there’s no way this one can keep going. And, and for a comparison sake, they’re not wrong. It’s the management, it’s the execution that’s very problematic. And trying to short the stock. You take Newsmax, which is a conservative brand of, of a, of a news company, They have a, you know, they don’t have a ton of carriers, but I mean, I’ve seen them on like some of my own news carriers on, on my channels, but they’re not on all of them. Their, their reach isn’t that great. You take Fox News, for instance, which is also considered a conservative brand.

4:03
They have 2.9 million. And again, I’m not trying to make this a political thing at all. And, and we’re going to talk about why you don’t make it political, but I’m just spitting out some facts. Fox News has 2.9 million viewers per night and probably the top cable channel out there. Newsmax by comparison Sake I think has like 200,000 viewers. That’s not a lot compared to Fox News. OK, Fox News is just one company within Fox Corp.

4:34
OK, so Fox Corp, what does that represent that stock symbol FOX, It not only represents Fox News but also Fox Business. I would, I haven’t looked at the numbers on this, but I would guess that Fox Business is probably also bigger than Newsmax. I could be wrong on that, but Fact Check me. That’s fine. But it also has TMZ, It has FX channels and it has Fox Sports. That’s a big one. And it also has all of the Fox local channels. So you’re talking about a ton of channels.

5:07
And you put all that together, it’s worth about $24 billion as a company. Newsmax at its highs was trading much higher than that, $24 billion, had a much higher valuation, and it closed the second day out at 21 billion. I can tell you right off the gate that does not equate. Newsmax is nowhere close to the size of Fox. But yet people, when they’re getting into the stock, they’re not looking at the capitalization of the stock. They’re not looking at what the true value of this company is.

5:37
They’re worried about missing out. And so the crowd that wants to short this, are they wrong for saying, hey, this thing’s going to come right back down? No, they’re not wrong at all.

5:46
It will come back down, but you don’t know when it will come back down. And you could say, you know, hey, I can, I can lose, you know, 100% on this or even more and I’ll be OK. And that that’s true on the service, but it may go way higher than what you think I was fully expecting at some point. You know this today.

6:06
I wouldn’t have been surprised, I guess, if I would have woken up and saw it trading at $500 a share because I’ve seen the kind of FOMO that can pour into these, these stocks. They’re absolutely nuts. I wouldn’t have been surprised it was trading at 1000, honestly.

6:22
Not to say that that it’s merited at that level, absolutely not. But I know how crazy and diabolical the retail crowd can get chasing after these meme stonks. And I did say stonk intentionally even, because I think you got to almost call them stonks because calling them stocks is almost like an insult to the actual legitimate stocks out there that aren’t, you know, just swinging 1000% in a day.

6:45
That’s, that’s kind of like penny stock behavior, right? So the risk of trying to short this is that you’re going to get just absolutely annihilated if it continues to go higher.

7:05
And even if you can afford to do so, doesn’t mean that you should do it. It’s it’s like the the Jurassic Park. What I think I’ve used this in a pop couple podcasts episodes, but man, it’s such a good quote. And and it’s word. What’s his name? Jeffrey Goldblum that he was playing that one character that’s kind of eccentric, but he says we were so busy wondering if we could, we didn’t ask ourselves if we should. And I don’t know if I said that correctly, but that’s essentially what he said.

7:34
And so we’re looking at whether or not we could, but not whether we should. That’s what I would compare trying to short a stock like Newsmax. Are you, are you right for assuming that it’s coming back down? Absolutely.

7:48
But will it come down on your timetable before your margin called? There’s a good chance that it won’t because that’s what the FOMO is like in these things.

7:55
So you want to keep that in mind. The best thing when it comes honestly to to the meme stock IPO’S or any IPO for that matter, is to just sit on the sidelines and let this stuff play out.

8:03
There’s way too much emotion. It’s impossible to manage the risk. The other the other question is, well, if I’m not going to short it out right, why not just buy some puts?

8:13
Well, most of the time and it this really goes for shorting too. It’s very hard to find shares to short. And likewise, it’s most, most of the time there’s not, there’s no options available to, to buy puts either.

8:26
So there’s no, there’s no options. I mean, I probably that would, it would seem like if there was options that would probably be the safer way just so that you’re not waking up to being down like 3 or 400%.

8:36
But the, the other question is, is why do you want to trade if you’re looking to get long? We talked about getting short.

8:45
Why do you want to get long on MNAX? Like what’s the whole purpose for that?

8:52
Is it because of the volatility, because there’s so many big price swings? You just, you know, can’t help yourself.

8:58
You got to buy into it. Well, some people might be doing it and they’re buying like two or three shares.

9:03
You know, they’re hoping to get a dinner at Chipotle. It’s nothing wrong with getting a dinner at Chipotle, but I do that a few times a week myself.

9:10
But nonetheless, you may not be trained with a lot of money. You may only be buying like 3 or 4 shares.

9:17
And so if it goes up, you know, 100%, you’ve made, you know, a little bit of change there.

9:27
You might be trading just hoping that those 3 or 4 shares will print you some money there. The other thing is hope, like we put our hope in the way too many stocks.

9:39
Like we marry ourselves to stocks. And that’s just plain stupid as well.

9:43
You can’t get emotional about trades. And when you get emotional, you’re going to start hoping for that trade to do what you want it to do.

9:48
You’re going to identify yourself with that stock, not identify as, but I didn’t identify with the stock like this.

9:55
Like you feel like a bond with that stock. But again, putting your hope in a stock that that is going to lead to disastrous results.

10:12
But one thing I would say that you can put some hope into is swingtradingthestockmarket.com.

10:12
But one thing I would say that you can put some hope into is swingtradingthestockmarket.com. Yes, this is my little sidekick to the show here. This is going to give you all my stock market research each and every day and in the process you’re going to get my daily watch list. You’re also going to get my bullish embarrassed master watch list each week And then at the end of each day, I’m going to review the watch list that I sent out that morning and and talk about what went right, what went wrong and my approach with it going forward.

10:37
Plus you’re going to get stock market updates and you’re going to get mega cap updates as well. And it’s it’s really cheap, really affordable. And essentially you’re getting all my stock market research. So check that out.

10:48
swingtradingthestockmarket.com. I think you’ll like what you see and you’re going to support the podcast and the broadcast process.

10:58
OK. So we’ve talked about the volatility behind it, that people are attracted to it for that.

11:01
People are attracted to it because they’re they’re high in their hopes and dreams to the stock. But another one, and we don’t talk about this enough probably on this podcast, but they’re putting their politics into the trade. They’re like, oh, yeah, you know, this is a good, you know, conservative brand.

11:15
They like it. Or it could be, you know, if Huffington Post came out with an IPO, they could say, oh, this is a good liberal brand. I’m going to, I’m going to buy this one up.

11:23
But rarely does your politics and your trading ever align. Well, I also equate that sometimes with our views of the macro economy.

11:33
We can say, man, this economy is going to crap. There is no way I’m going to buy.

11:37
I’m going to start shorting this market because it’s a bad economy. Well, then all of a sudden you’re short on a market that’s rallying on bad news.

11:45
OK, bad news is good news, you know, and that happens quite a bit. And all of a sudden you’re like, well, this doesn’t make sense.

11:50
The, the, the economy is horrible. The market should be going down.

11:54
And often times it does the exact opposite because you might have Fed intervention where they’re cutting rates.

11:58
And so the market’s responding to the Fed cuts, even though the market’s going to cut crap. If you start to put your beliefs about the overall economy into your trades, that’s usually going to be a disaster for you because trading and macroeconomics, they don’t operate on the same timelines.

12:11
Macro events take much longer to infiltrate into the broader, broader markets.

12:26
And so just as much as the economic views that you might have can really be a problem for your trading your politics as well.

12:36
And it’s not even just like Republican or Democrat. It’s like the, the Wall Street bets crowd that was so bent on, oh, we’re going to squeeze the hedges or we’re going to shoot this stock up to the moon and, and bankrupt Wall Street.

12:53
Did that happen? No, yes, they did change the rules. I, I, I sympathize with you on that.

12:57
You know what the stuff that they did with like Robin Hood and all that, it was wrong. But that’s, that’s the reality.

13:02
That’s what you traded, you know, and, and so trying to take an activist standpoint with your, your stocks is not a good, good thing to do at all.

13:14
And so a lot of people are buying Newsmax because it might align with their beliefs, you know, that they don’t like the, the, the news media.

13:21
And so they’re saying, Hey, I’m going to buy Newsmax and I’m going to support this cause. But that doesn’t necessarily align with successful trading and it probably is going to result in losses.

13:31
I mean, you saw the same thing with like the DJT, You saw that with the meme coins.

13:37
Gosh, I mean, you could go on and on. You’re seeing it from the, from the liberal side where they’re trying to get Tesla to go down.

13:43
And then they’re going to get squeezed at some point too, because regardless of your profits, you take a stock down far enough, there’s going to be some value there.

13:51
And people are going to put, put the, the, the smart money is going to put their politics aside and not let that infiltrate into why they’re buying the stock.

13:58
They’re going to buy it regardless. I mean, smart money there.

14:02
There’s, there’s people out there, there’s institutions out there. They’d sell their mom down a river.

14:06
If, if, if it means that they can make a buck. So you can’t expect, you know, regardless of what your views are, if it’s because you want to buy Newsmax because you know, you support, you know, the conservative news element, or if it’s Tesla, you want it to go down because you, you hate Elon, whatever it is, those, those are not reasons to short or to go long on a specific stock.

14:25
It’s absolutely moronic on both sides. I’m probably taking off everybody, I guess, on this podcast. I try not to and I’m not trying to get into politics.

14:39
I think it’s stupid to inject your politics into trading. And essentially that is what I’m trying to say here.

14:44
Don’t inject your politics into trading. It’s crazy.

14:49
You want to give up your money, just send it to me, OK?

14:55
I’ll take it. Or give it to a good ’cause, you know, feed the homeless or give it to a church that can make some good use of that money.

15:02
But I would not be like, oh, you know, I don’t like this person or I like this organization because they’re politics aligned with mine.

15:08
I’m going to buy the stock because especially at IPO, that’s up 2500%. That’s just throwing your money away.

15:16
And it’s the FOMO too. Not, it’s not just the volatility, it’s not just the hope.

15:22
It’s not just the politics, it’s the FOMO. You know, they, they, they see the stock going up.

15:27
It’s being talked about on on the different social media platforms and they’re like, man, I got to get some of this action.

15:33
And so they keep watching it and they’re like, Oh my gosh, if I would have bought it when it was at $20, I’d be up 100% already.

15:40
It’s trading at 40. And then they go away.

15:41
It’s like, well, it’s probably not. It’s probably too late now.

15:43
And then they come back later and it’s trading at $100 and they’re like, Oh my gosh, what did I do?

15:52
And then look, it’s trade at 265. Like that’s it.

15:54
I’m buying it at 265. And then all of a sudden it’s down 57%.

15:58
And you were the high tech of the day. But it’s that FOMO. What?

16:00
What’s so crazy though, is that hardly anybody talked about WTF, which is a wild name for a stock symbol.

16:05
But what is it like Waton Industries? I don’t even know what they do, but this was a this was one that went up 400% on the same day.

16:13
Do you hear anybody hardly talking about that? I didn’t, but it, it went up 400%.

16:18
I mean, it’s not 2500%. That’s probably easier to manage the risk on a 400% runner than it is a 25% runner, 2500% runner that is.

16:27
But you’re only focused on MMA XS. That’s because that’s what the talking heads are talking about.

16:31
That’s why you don’t see me turn on the, the radio. I don’t turn on the news.

16:37
I don’t want any of that. I don’t need that disturbance in my life because those people will hype you into a stock.

16:49
You know, the guests that they bring on, they’re going to try to hype you into the stock because they want to sell their shares to you.

16:57
And so you’re only focused on this one is because that’s what you’re hearing about. That’s essentially what I’m trying to say.

17:05
The last thing I would say is, is that you know, we’re in a market correction. We’ve fallen 10% on SPY off of the all time highs.

17:15
I can tell you when you’re seeing this kind of behavior taking place at the recent lows that we’re that we’re at right now, that is not synonymous with market bottoms.

17:22
That tells me that the speculation hasn’t been squashed yet. And in order to get to a market bottom, you need to squash speculation.

17:32
And so when you’re seeing meme stocks still rallying like crazy, yeah, that that’s probably a good sign that the market hasn’t reached the bottom yet.

17:40
That kind of crap was going on in, you know, 2020 and 2021 and 2022. It went away.

17:43
Obviously, it’s come back since then. But in 2022, when that market kept selling off, nobody was wanting to buy a IPO.

17:53
Heck, nobody even wanted to bring an IPO out into the market. So overall, when you’re seeing this kind of stuff from a broader standpoint, it is not indicative of a sign that this market is bottoming just yet.

18:00
In fact, this gives me more reason to believe that this market has another leg down as a result. And so when it comes to trading meme stocks, let’s wrap wrap this up here.

18:12
Going long, going short, buying puts, buying calls, none of that stuff’s good. I mean you can’t really buy puts or calls anyways.

18:18
And if you can find shares to short and some people might be able to provide it with you, it’s still the risk element on that it actually is crazier than buying an Max outright because you don’t know if that’s going to go up two or three 100%.

18:29
So, and you know what the other thing is, is a lot of times people will get into the stock, but on, on the short side thinking that they’re being clever and stuff.

18:40
But I can tell you if my, my experience with the market, market loves to, to humiliate people and being clever is definitely not the approach to take.

18:50
And you got to ask yourself too, why are you wanting to trade MMAX?

18:57
If it’s something because you like the action, IE the volatility or it aligns with your politics, or you’re hoping to get something out of it, or you just can’t stand on the sidelines anymore, that’s probably a very bad sign that you’re, you’re going to ultimately lose some money.

19:21
Well, guess what? Every time that stocks going down and somebody selling it, somebody else is buying it at a horrible price.

19:26
When it goes from the, from its highs down 57%, somebody’s buying it and becoming a bag order.

19:32
Every time there’s a transaction, that’s another bag holder. So you may have made some money and number of people that made money off of it is far less than number of people that are going to be taking losses.

19:41
Because when you’re liquidating millions of dollars of positions because you got in at the very beginning, you’re requiring a lot of buyers to step in and and assume those shares for you.

20:00
And finally, just from a comparison state. Look, when you’re looking at these IPO’S, look at some of its competition that’s more established.

20:08
It’s been around what? What does that look like compared to the established competition?

20:13
Is it just, is the evaluation just over the top? Good chance it is if you’re seeing a stock that’s running 2500% in a couple of days.

20:20
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20:25
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20:34
Check out swingtradingthestockmarket.com and don’t forget to send me your emails, ryan@shareplanner.com.

20:38
Your questions, I’d love to hear from you guys.

20:42
I’ve done a few here just on some personal topics that I thought were important to address from a swing trading standpoint of late.

20:48
But I’m planning on getting back to some of those details here very shortly. But yeah, similar questions.

20:52
Let me know what’s giving you problems, what’s troubling you. I want to hear from you.

20:57
Thank you guys, and God bless. Thanks for listening to my podcast, Swing Trading the Stock Market.

21:03
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21:11
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21:17
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21:28
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com.

21:38
All the best to you and I look forward to trading with you soon.