The value of Tupperware’s stock, which manufactures plastic containers and has been in financial difficulties, has exploded.
During the last two weeks, the value of the stock has multiplied. In July, the company’s value was less than 28 million dollars and earlier this week already almost 240 million. The stock fell on Wednesday and Thursday, but was up again on Friday.
Tupperware, which uses network marketing, became very popular already in the 50s and 60s, initially in the United States and later around the world. However, it has failed to renew itself at a sufficient speed, and the last few years have been creative in economic distress. The threat of bankruptcy has seemed to be hovering over the company for a long time.
A rescue operation engineered by meme investors
What made the share price of a company floundering in the financial quagmire momentarily explode upwards?
OP Financial Group’s exchange-traded funds (ETF) and international stocks expert Joona Heinola according to the background are probably ordinary people on social media platforms.
The phenomenon is called, for example, the Reddit phenomenon and meme placement. According to Heinola, the appointments are strongly linked to social media, where the phenomenon originated. Perhaps the most famous example of this is the rescue of Gamestop, a company that sells game console games.
– In the case of Gamestop, it started specifically from the Reddit platform. Somehow, a lot of memes are generally made of these on social media, which then easily spread. That’s how this term ‘meme investment’ comes into being, says Heinola.
According to Heinola, on the other hand, the term also has the echo that the selection of an investment target is not based on any traditional investment strategies, but on a stock that has been hyped on online forums.
Organizing against short sellers
According to Heinola, the phenomenon is based on the fact that a group of people on social media organize themselves against large and wealthy “short takers”. Shorting, i.e. selling short, practically means betting that the stock of a creative company in financial distress will fall.
– When the share price falls, the short seller makes a profit, Heinola explains.
Online investors gather behind the stock and start raising its price by buying a lot of the stock. When the stock price goes up, short sellers make a loss.
Meme investing involves the possibility of making a profit, although, according to Heinola, the phenomenon is more about the spirit of rebellion.
– Someone makes big profits and someone makes big losses. But in phenomena of this style, there is more emotion involved than reason, he states.
A self-feeding phenomenon
The Reddit phenomenon is quickly starting to grow itself. According to Heinola, the more the company’s price rises, the more people are encouraged to join the investment. At the same time, short sellers are almost forced to accelerate the price rise.
– Those who have shorted have to buy shares for themselves as quickly as possible in order to minimize their own loss. It in turn strengthens this phenomenon even more.
The term short squeeze is used in the corporate world for this phenomenon.
According to Heinola, the simple law of supply and demand applies in the situation: when there is suddenly a lot of demand and little supply, the price rises constantly and the rate eventually rockets up.
Tupperware was a fertile target
According to Heinola, Tupperware was in many ways a suitable target for meme investing. For example, it had a large short position, meaning that up to 27 percent of its shares were short-sold before the Reddit phenomenon took hold.
– Someone has seen that this is a great place to go shopping, and then spread the word, says Heinola.
According to Heinola, Tupperware has been compared to Gamestop, which sells games, also because meme investors often need a story to arouse the desire to invest.
– Gamestop has been a company whose brand has been loved or important in some way, and maybe the same is true for Tupperware. It must have a story that motivates and that can be sold to other investors, says Heinola.
The future is still uncertain
Meme investing is unlikely to save 77-year-old Tupperware from its financial predicament in the long run.
According to Joona Heinola, it is really difficult to predict the movements of short squeezes.
– Always in such sudden upswings, the daily movements are really drastic. But usually, in the long term, these have been more of momentary increases. At some point, the situation stabilizes to the level it started from.
For example, Gamestop’s stock rose for a long time, but has now settled at a much lower level than in its peak days.
According to Heinola, the situation could help Tupperware to survive if it is a longer-term boom. If, for example, the company has its own shares under control, which it could give up now at a higher price, the situation would help.
– But if the situation remains short-term and the company can’t take advantage of it, then I don’t think it will affect the future, he says.
On the other hand, Joona Heinola sees that the situation could otherwise make it possible to get additional funding.
– The Reddit phenomenon brings with it, of course, a lot of attention, which in the best case can be turned into money, he says.