Stocks come and go, but every year a few tiny companies get promoted to the small-capitalization indexes. Some eventually make it all the way to the S&P 500.
What they don’t do is go in the space of 18 months from being a penny stock with a market value of $39 million to be worth more than a dozen S&P 500 companies, yet that is exactly what FuelCell Energy Inc. has done.
FuelCell isn’t alone. Fourteen members of the Russell Microcap index have risen so much that they ended Thursday larger than the smallest S&P stock. One, real-estate broker eXp World Holdings , has a market capitalization of nearly $10 billion, more than double the smallest S&P stock. When the index reset was announced last year, the largest stock in the index had a market capitalization of $840 million.
The scale of trading in GameStop shares is as extraordinary as the daily gains in price, suggesting widespread disturbance to people’s judgment. On Tuesday, $22 billion of shares changed hands, more than in Apple, the world’s largest company, and double GameStop’s market value. Adam Smith, the founder of economics, called speculative manias “overtrading,” and this is what they look like.
The hope of getting rich is only part of what is inflating the bubble. Mr. Kindleberger argued that speculative manias needed innovative sources of financing, and the private traders on r/WSB have one: the shift last year to make trading in options free on Robinhood and several other platforms.