Trump Media, Reddit surge despite questionable profit prospects, taking on the 'meme stock' mantle

Reddit and Trump Media are the first notable social media companies to begin trading publicly in the last five years. They're also, thanks to the rabid reception among investors coupled with the companies' fuzzy profit outlooks, the latest meme stocks.

Meme stocks are typically shares in companies whose underlying business fails to justify a surge in their price. The action is often driven by small investors who for some reason pile into a stock, be it belief that a struggling company can turn itself around, a disdain for so-called short sellers — or fidelity to a former president. Or simply opportunism.

Reddit's initial public offering last week was the most anticipated debut so far this year, and it didn't disappoint, rising 48 per cent on the first day. The stock gained an additional 30 per cent Monday.

Then Trump Media stole Reddit's thunder by jumping as much as 59 per cent on its first day of trading Tuesday, before cooling off and closing with a gain of 16 per cent. On Wednesday, the stock gained an additional 14 per cent to close at US$66.22. Former U.S. President Donald Trump holds a majority stake in Trump Media that could bring him billions.