In what is becoming a recurring theme on Wall Street, investors need to be careful about pumping up the wrong stock over naming confusion.
We’ve seen it time and time again over the past year as more inexperienced retail investors enter the space.
First, it was Zoom (NASDAQ: ZM), then it was Signal, and now it’s Clubhouse, as name confusion sent the wrong company’s stock soaring.
Why does that matter?
The Clubhouse app that everyone is talking about right now is an invitation-only audio-chat that has hosted the likes of Elon Musk and Oprah. Google searches for “Clubhouse stock” reached a peak on February 1, the day after Musk first spoke on the platform, but the only problem is that Clubhouse is a privately-owned company.
Confused by the name, investors pumped money into shares of Clubhouse Media Group (OTCMKTS: CMGR), a healthcare/social media influencer management company — yes, you read that right — based out of Guangxi, China.
Formerly called Tonji Healthcare, the company acquired ‘West of Hudson Group’ last August, which owns ‘The Clubhouse’: a collection of content creation houses occupied by widely followed social media influencers. Hence, the name change.
And at one point in February, its stock was up more than 1,000% YTD — it’s still up over 400%.
With stimulus checks expected to be deposited in recipient accounts either today or tomorrow, the stock market is bracing itself for a surge in activity — in fact, analysts are predicting that retail investors will buy $3 billion worth of U.S. equities.
Young, inexperienced retail investors will play a large role in this spending spree, with Clubhouse Media Group the likely target of some misguided funds. It is important for investors to be aware of this risk now, as any gains made will be massively outsized, and once investors earn enough — or realize they’ve bought the wrong company — a massive sell-off will occur.
Be smart with those ‘stimmies’ and invest wisely folks.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.