CIO Dominic Ceci's Gives Investing Insights on Koss Corp. 'Meme Stock' Craze

Milwaukee-based headphone maker Koss CorpKoss CorpKoss Corp . is ending 2024 with a wild ridea wild ridea rideon Wall Streeton Wall Streeton Street .

Its stock price is fi nishing the year roughly double compared to the beginning ofthe year − despite little new information about Koss.

The “meme stock” craze, which aff ected Koss along with GameStop and AMCEntertainment, is likely helping boost the price. Koss stock closed Mondaytrading at $7.43 per share compared to a closing price of $3.44 on Jan. 2, according to Yahoo Finance. according to Yahoo Finance.

Day traders have been trying to recreate the 2021 meme stock craze. 

Short sellers bet stock prices will fall.

They earn a profi t by borrowing shares, selling them, and then buying themback later at a lower price. That strategy fails if the stock price rises − whichmost notably happened with GameStop in 2021. GameStop in 2021.

Perhaps the best-known meme stock trader is Keith Gill, known on YouTube as"Roaring Kitty."

Gill's social media posts in May led to big jumps in share prices for GameStopand AMC Entertainment. Stock prices also increased at Koss − which typicallyis thinly traded.

GameStop's price tumbled in June, but the price jumped on Dec. 6 after another social media post by Gill.

Dominic Ceci, chief investment officer of Racine-based Johnson Financial Group, said people trading stock on rumors or gut feelings is nothing new.

“It was crazy to watch. It was kind of entertaining,” Ceci said. “Which isn’t reallygood for our industry in the long run. Because it creates this perception ofunfairness.”

Taking a short position, Ceci said, is necessary for a healthy market to counterinvestors who believe stock prices will increase. Meanwhile, no one knows ifthe meme stock fad is a permanent factor.

“It changed the way some hedge funds think about the markets,” Ceci said.“Certainly short sellers have had to rethink how they play that game.”

Ceci emphasized that observers shouldn't "confuse luck and skill.”

"Now, I’m not saying it was 100% luck. They played a game and they won,” Cecisaid. “Ultimately, the value of all of those companies came down off of theirhighs. It’s not like it was a long-term win.”

Koss executive 'can't get into details' on stock price

Koss executives sold some of their shares for millions of dollars during stockprice increases in 2021.

But the company itself can benefi t from price run-ups.

“If their share price is getting infl ated, for whatever reason, if they can issuenew shares at that higher price than that’s more cash on their balance sheet,”Ceci said.

That cash can be used for such things as reducing debt or expandingoperations, he said.

“It actually creates more optionality," Ceci said. "We saw this happen with someof the meme stocks.”

Michael Koss Jr., vice president of marketing and grandson of the company'sfounder, declined to answer the Journal Sentinel's questions about the memestock phenomena. He's the son of Michael Koss, company chair and chiefexecutive offi cer.

“I can’t really get into the details of that," Koss Jr. said, "but I will say if you diginto some of the public disclosures and things like that you can get a goodpicture to answer some of those questions."

The company's fi lings with the U.S. Securities and Exchange Commissionprovide some details as to how trading aff ected Koss Corp., which has a June 30fi scal year end.

In 2020, Koss reported a loss of about $465,000. In 2021, when the stock tookoff , the company made that money back by earning $493,000.

In 2024, Koss reported a loss of nearly $951,000.

Koss seeing benefi ts from retro gaming

Despite that loss, Koss executives are excited about the company's new PortaPro wireless headphone. Its sales are going well, Koss Jr. said.

The company also partnered with ModRetro which is developing a new versionof the popular Nintendo Game Boy called the Chromatic. Koss is providingmatching headphones for each device.

Those Chromatic devices and Koss headphones will be available for purchasesoon at GameStop stores.

“We’re not directly selling to GameStop, it’s actually our partners ModRetro,”Koss Jr. said. “But it’s a really cool relationship...it’s one of the cool colorwaysand it’s only available at GameStop stores.”

Koss Jr. said retro gaming is “just starting to take off " − creating an opportunityfor the company to sell more video game headphones.

“We’ve actually seen a nice rise over the last couple of years,” Koss Jr. said. 

As seen in the Milwaukee Journal Sentinel.