In recent weeks, meme stocks have had a comeback. Bed Bath & Beyond and AMC Entertainment Holdings, for example, have recently shown a great deal of volatility, rising in value before plummeting. Meme stocks are a bit of a roller coaster for investors, and depending on when you take a chance on purchasing, they may result in either tremendous gains or severe losses.
SIGA Technologies (SIGA -1.36%) is one company that has shown potential as the next popular meme stock. Here’s why it’s been very volatile recently and could continue to be in the coming weeks and months.
Siga’s popularity has increased since it treats monkeypox.
The most recent international health emergency is the monkeypox epidemic. As of August 22, there have been over 41,000 instances of the disease worldwide, spread over more than 90 nations. Though it hasn’t received the same kind of pandemic declaration as COVID did a few years ago, anxiety is undoubtedly high.
The fact that Siga’s Tpoxx medication is approved for “compassionate use” by the Centers for Disease Control and Prevention is one of the factors contributing to the company’s stock price increase of more than 200% this year. Patients who meet a number of requirements, such as having a serious disease or condition, not having access to a suitable treatment, the benefits outweighing the risks, and being unable to participate in a clinical trial, may be granted access to an experimental medical product that hasn’t been approved.
Even this limited FDA clearance for Tpoxx has provided the firm a significant edge since the FDA hasn’t completely authorized any therapies for monkeypox. Jynneos, a vaccine produced by the Danish biotech firm Bavarian Nordic, has received FDA approval for emergency use in high-risk people. The issue is that supplies are few and the US government is dividing dosages into fifths by injecting the vaccine intradermally, under the skin, to reach a larger population. People will require a medication like Tpoxx in the meantime while case numbers keep rising.
In 2018, the FDA authorized Tpoxx for the treatment of smallpox, and to until, the major justification for nations to purchase it has been to keep some on hand in case of bioterrorism using that illness. Although instances of monkeypox have been increasing and the therapy is effective against it as well, Tpoxx demand has increased. In an effort to profit from higher sales figures, retail investors have started buying up the shares. Investors could even want Siga to replace Moderna.
Trade volume has increased dramatically.
Siga’s share price has been growing, and its trading volume has also dramatically increased.
Less than 200,000 shares of the stock were often traded every day at the beginning of the year. The daily quantities are now 5 million or more, nevertheless. The sharp rise shows the stock has strong momentum and has gained enormous popularity among ordinary investors.
Short interest is also rising.
Short interest, or the number of speculators predicting the company will lose money, is another characteristic of meme stocks.
If the firm succeeds and disproves the doubters, a significant short interest might eventually result in a short squeeze.
Is investing in Siga too risky?
Following a surge in Tpoxx orders, Siga’s revenues increased 92% year over year to $16.7 million for the quarter that ended June 30.
Since investors are essentially wagering on how large of an issue monkeypox will be for the globe, predicting how long this trend will endure is difficult. If it turns into another COVID, the healthcare stock can wind up imitating Moderna. Shares in Siga might drop shortly, however, if monkeypox turns out to be less harmful and more manageable.
For the majority of investors, the stock is probably too risky to gamble on right now. This isn’t a stock you need even think about adding to your portfolio unless you have an exceptionally high risk tolerance and are okay with severe volatility.