GameStop Shares Surge as “Roaring Kitty” Returns to X.com
Shares of videogame retailer GameStop surged 70% on Monday after “Roaring Kitty,” a former marketer at an insurance firm credited with sparking the 2021 meme stock rally, returned to X.com after a three-year hiatus from social media.
GameStop’s shares hit an 18-month high at $38.20 and were halted multiple times for volatility. They were headed for the sharpest one-day percentage gain since 2021.
The Ripple Effect
The Grapevine, Texas-based firm’s rally also boosted other meme stocks that have been hammered over the past year. Theater chain AMC jumped 27%, while headphones maker Koss Corp soared 23%.
Keith Gill, known as “Roaring Kitty” on YouTube and “DeepF***ingValue” on Reddit, was a key figure in the so-called Reddit rally, which saw shares of GameStop surge as much as 21-fold over two weeks in January 2021 before crashing to pre-surge levels in the subsequent days.
Gill on Sunday posted a sketch of a man leaning forward in a chair, a popular meme among gamers that indicates things are getting serious, with no caption.
“Roaring Kitty” did not immediately respond to a Reuters request for a comment.
Retail Investors’ Interest
GameStop and AMC were the most traded stocks among retail investors at 11 a.m. ET, J.P. Morgan data showed.
Roaring Kitty “seems to be the most likely suspect for the renewed interest today… but I would be careful not to characterize the participants in this phenomenon as investors,” said Art Hogan, chief market strategist at B Riley Wealth.
“There’s no fundamental change in any of the companies that are popularized in this phenomenon.”
A Rocky Road Ahead
GameStop, despite cutting jobs to reduce costs and reporting lower fourth-quarter revenue, saw a surge of over 57% in May, but it still remains sharply below its $120 peak of 2021.
“It’s unlikely you’re going to see a repeat of meme stock mania for any sustained period of time because it was a point in time when you had a bunch of people stuck at home with free money and that’s no longer the case,” said Thomas Hayes, chairman at Great Hill Capital LLC.
Short Selling and Options Activity
GameStop has about a quarter of its publicly available shares in short position, and the bearish investors were set to lose $1.23 billion on paper on Monday, analytics firm Ortex said.
Short sellers typically sell borrowed stocks in hopes to make a profit by buying back later when the price falls. On Monday, no GameStop shares were available for borrowing on trading platform Interactive Brokers, a Berlin-based trader confirmed.
Meanwhile, options activity in the stock has been on the rise since the beginning of May.
Open interest in call options hit 588,205 on May 10, the highest this year, before slightly pulling back on Monday to 501,296, according to TradeAlert data.
“Institutions looking at GameStop from the short side will remember what happened in 2021 and be more likely to sit this one out,” said Chris Murphy, co-head of derivatives strategy, Susquehanna.
The Movie-Inspiring Episode
The entire episode inspired Craig Gillespie’s 2023 movie “Dumb Money”.
The events surrounding GameStop’s stock rally and its impact on short sellers and options activity in 2021 made a lasting impression to the point of being adapted into a screenplay.
Regulators Keep a Watchful Eye
The meme stock rally in 2021 spread to other highly shorted stocks, including AMC, as Reddit users banded together to squeeze bearish hedge funds, costing them billions in losses and drawing scrutiny from U.S. regulators.
Conclusion
GameStop’s stock has once again seen a significant surge with the return of “Roaring Kitty” to social media, sparking renewed interest among retail investors. As the stock market experiences fluctuations, time will tell if a sustained meme stock mania will reemerge or if the recent volatility will fade away.
For now, investors and market observers are closely watching GameStop’s actions along with potential regulatory interventions to maintain balance within the stock market.
