Reddit co-founder Alexis Ohanian told CNBC on Thursday that the meme stock frenzy – which traces its roots back to the online forum website he helped create – happens when momentum investing is fueled by technology.
“Really, the existence of people getting upset and upset about a stock happened, you know, it happened in barbershops. It happened in bars,” Ohanian said in an interview with Squawk Box. “Retail investors have simply never been able to seize an opportunity in real time, and so it is in the age of ubiquitous social media.”
“Meme stocks are a charming name, but I think momentum investing is nothing new,” added Ohanian, who co-founded Reddit in 2005 with current CEO Steve Huffman. Ohanian, now a venture capitalist, stepped down from Reddit’s board of directors in June 2020.
The spotlight on various meme stocks has brightened in the past few weeks, months after the saga first caught Wall Street’s attention in January, with GameStop as a prominent example. Stocks that have recently been touted on Reddit forums and have seen prices soar, at least temporarily, include AMC Entertainment, Clover Health, and Clean Energy Fuels.
Ohanian recognized professional investors are jumping in on the action as well, reiterating the comments of market maker Virtu Financial CEO Doug Cifu, who told CNBC that “this is not just a group of retailers trading these stocks”.
Even so, Ohanian said that increasing individual investor exposure to the markets is positive in the long run – even if there is risk. “We really need more financial literacy … but what we need to keep in mind is that this is here to stay,” he said.
“We crossed Rubicon, and it doesn’t matter what platform or another platform, that’s how people share content. You can open an app and make a trade and it just gets easier, ”added Ohanian. “It just gets more normal for a generation that comes up with it. They won’t even think of calling a stockbroker or hiring a professional for a lot of people.”