• The new movie "Dumb Money" dramatizes the 2021 meme stock saga.
• On Thursday, GameStop closed more than 78% below its all-time high. AMC was down more than 97% from its peak.
• Many social media traders discussed the meme stock moment in David vs Goliath terms — retail traders versus hedge funds.

As shares of GameStop start to climb in late 2020 and the early days 2021, in the midst of the pandemic, characters in the new movie "Dumb Money" encourage their friends to sell.

There's Pete Davidson, playing the brother of Paul Dano's Keith Gill, aka Roaring Kitty, telling the burgeoning YouTube star to cash out and buy a Ferrari. There's Anthony Ramos' Marcus, a GameStop cashier, being lectured by his parents that this stock trading thing isn't real. And there's America Ferrera's Jenny, a nurse and single mom, whose coworker tells her that taking financial advice from a guy in a headband is not the best use of her time or money.

But those characters and the others in the film, which hits theaters this weekend, don't just ignore that advice. They double down, buying more shares and options, and start to incessantly check their phones and TV news to see how high the stock is climbing.

"Diamond hands ... we're going to hold the line," Jenny says.

To the moon

The very peak of the meme stock mania, which saw retail traders encourage one another on social media sites like Reddit's WallStreetBets to buy and hold heavily shorted stocks, came on Jan. 27, 2021.

That's the day GameStop hit its all-time closing high of $86.88 per share, and saw more than 373 million shares change hands. One year earlier, in 2020, GameStop traded about 8.5 million shares on the same day.

That was also the highest volume day on record for theater chain AMC Entertainment, topping 142 million — up from less than 400,000 on the same day a year earlier. Shares of AMC would hit their own record high in June.

The excitement has since ebbed, even if it hasn't gone away completely, and traders who bought shares on that day would now be deeply in the red. On Thursday, GameStop closed more than 78% below its all-time high. AMC was down more than 97% from its peak.

Reddit versus Wall Street

Many social media traders discussed the meme stock moment in David vs Goliath terms — the retail traders versus the hedge funds.

And the retail traders won at least some of the battles. The massive spikes in the stocks were caused in part by "short squeezes," which occur when a rising stock forces those investors who bet against the company to cover their position by buying back shares to limit their losses, creating a feedback loop that pushes the stock even higher.

The losses caused Gabe Plotkin, a short-seller played by Seth Rogen who bet against GameStop with his hedge fund Melvin Capital, to completely shut down his fund.

There were also accusations of fraud.

The high level of short interest, and appearances by several meme stocks on the SEC's "fail to deliver" lists, fueled theories from retail traders that there was "naked" or synthetic short trading going on. An SEC staff report on GameStop found no evidence of naked short selling, however.

Another center of the controversy was the brokerage firms themselves, particularly Robinhood.

Several brokerages limited trading in meme stocks at the height of the meme stock mania. The massive moves in the stocks, combined with heavy options trading activity, appeared to overwhelm the ability of companies like Robinhood to manage risk.

Robinhood itself went public in July 2021. The stock is down more than 70% from its IPO price.

AMC and GameStop

As for the meme stock companies themselves, it is still unclear whether the fundamental theories of some Reddit traders were correct.

The GameStop turnaround efforts of Chewy co-founder Ryan Cohen, who became something of a hero to the retail traders, have shown little sign of working. Former Amazon executive Matthew Furlong was ousted as GameStop CEO in June after about two years on the job, just one move in a series of executive shakeups at the company.

The financial results have also been underwhelming. The company generated just under $1.2 billion in net sales in the second quarter of 2023, its most recent report. In the second quarter of 2019, before the meme stock mania began, the company generated about $1.3 billion in net sales.

Meanwhile, AMC CEO Adam Aron has leaned into the meme stock status for the theater chain, offering rewards like popcorn for shareholders.

The company has also used its popularity to raise additional cash by selling more shares. AMC announced on Wednesday that it had raised more than $300 million in an equity raise made possible by a corporate finance maneuver involving preferred stock it called APE shares — a cheeky reference to one of the references Redditors adopted for themselves.

The new cash has certainly been a big support for AMC with the box office still struggling to reach pre-pandemic levels, but the theater chain also made the curious move to buy a stake in a gold mine.

The AMC stock sales have diluted the holdings of individual shareholders, and the market cap of AMC is still down more than 50% from its peak.

For the Wall Street titans who became the enemies of Reddit traders, the results have been mixed. Several short-sellers have said they pulled back from that business after the meme stock squeezes, though other trading firms likely made profits in the highly volatile markets.

And even after his fund sustained heavy losses, Plotkin still had a enough money to buy a controlling interest in the Charlotte Hornets NBA Franchise.

At the end of "Dumb Money," the movie shows the gain in net worth of many of the retail traders who sold their shares, presumably near the top. Several of the characters made more than $100,000 on their trades.

But Jenny, the nurse character whose Reddit name was "StonkMom," was still holding on to the stock — her net worth having dropped back below zero.