June 23, 2024
  • Internet sensation Keith Gill (also known as Roaring Kitty), who drove the meme stock mania back in 2021 has resurfaced, making his first post on X after 3 years.
  • As a result, stocks of GameStop went up by 74% and it became one of the most trending topics on Reddit.
  • Back in 2021, Gill had saved the company from the verge of bankruptcy. But this time, a repeat of the meme stock mania is not likely to happen.
  • The prices may actually be rising due to the company’s stock buyback—and if the management acts proactively, it might be able to fuel the upward trajectory.

Roaring Kitty’s Return Shoots up GameStop Shares - But the Real Reason for the Rise Is Something Else

The return of Keith Gill, popularly known as Roaring Kitty, have resulted in an outlandish increase in the prices of GameStop shares.

The official ‘Roaring Kitty’ account shared a post on X after a long hiatus of three years. The post is a cartoon sketch of a man on his chair with a game controller in his hand.

It quickly went viral and received a whopping 23.6 million views at the time of writing. It was then followed by a bunch of other posts with the same common ‘comeback theme,’ featuring movie clips and music.

As a result, GameStop shares shot up by around +120% overall from last week’s close ($17.46), making a high of $38.20 and finishing the day at +75% (from $26.34 to $30.45). The effect was so severe that GameStop had to halt trading several times during the day due to volatility. Not just that, it shot up by another 127% in after-hours trading.

GME chart

The company was also one of the most trending topics on Reddit on Monday. In the last 24 hours alone, there have been more than 600 mentions of GameStop.

Other companies like AMC and Reddit also got caught in the frenzy. On Monday, AMC’s stock went up by around 78% (from $3.52 to $5.19), and at one point during the day, the prices had almost doubled. Reddit, too, ended the day with a healthy ~9% boost (from $56.49 to $58.19).

Who Is Keith Gill ‘Roaring Kitty’?

Keith Gill is a former financial analyst at MassMutual who gained popularity on social media back in 2021 when he influenced newbie retail investors to invest in GameStop shares.

He started religiously posting on Reddit subcategory Wallstreetbets, where he became famous under his username “DeepF——Value” He even made strategy videos on YouTube.

By the time the ‘mania’ came to a halt, the incident got so much attention that the entire phenomenon was turned into a full-fledged movie last year called ‘Dumb Money.’

Understanding the 2021 Meme Stock Mania

On one hand, small traders under the influence of Gill were betting on GameStop while on the other hand, hedge funds were betting against the survival of the company by shorting its stocks.

Once Gill and his followers had bought thousands of GameStop shares, it triggered a ‘short squeeze’ and large investors who were betting against the company were forced to buy the rapidly rising stocks to offset their losses.

By the end of the frenzy, GameStop had gone up by a jaw-dropping 1000% whereas AMC’s share prices increased by 2300%.

Now, GameStop wasn’t the only company to benefit from this phenomenon. AMC Entertainment and Bed Bath & Beyond also profited from this. Together, the companies started to be known as ‘meme stocks.’

Gill, who invested $53,000 in the stocks back in 2019, made a whopping $48 million in profits, whereas hedge funds such as Citron Research and Melvin Capital lost about $5 billion. Wow!

Roaring Kitty’s Fall and Disappearance

Soon enough, Keith Gill aka Roaring Kitty garnered a large social media following. But all that came to a halt when he revealed that he lost $13 million in one day on his investments in GameStop.

At the same time, he was also slapped with a lawsuit that accused him of “deceitful and manipulative conduct” that helped him profit off promoting GameStop shares.

Then he had to appear before the Congress to explain the “meme stock craze” where he managed to defend himself by saying that he was just a casual day trader and he only started out to create an educational platform for investors.

“The idea that I used social media to promote GameStop stock to unwitting investors is preposterous.” – Roaring Kitty in 2021

As a result of these controversies, he left social media, and eventually his social media following started going down. Until now!

A Little about GameStop

GameStop is a popular American video game, consumer electronics, and gaming merchandise retailer.

Back in 2021, it was a struggling company that benefited from the meme stock craze, as discussed above. In fact, the highest its stock price has ever gone is $438, which, as you would have guessed, was in January 2021.

However, since what can be called a wrongly-fueled peak, its stocks had steadily dipped. Things got so bad that the company announced an unspecified number of job cuts in March to lower costs.

Then a ray of sunshine hit the company’s roofs when it reported its first annual profit since 2018 earlier this year. It’s very likely that this is what reignited Gill’s interest.

However, while the resurfacing of Roaring Kitty has bumped up the GameStop stock, there won’t be a repeat of the meme craze phenomenon—meaning prices won’t keep spiraling upwards for a sustained period of time, at least that’s what the experts say.

Is Roaring Kitty Really Responsible for GameStop’s Stock Surge?

While most experts believe that it was the resurrection of Roaring Kitty that led to this sharp increase in GME prices, there’s another angle to this story—and one that’s more practical and extremely plausible.

According to a post on X, the GME rise is actually due to an approved stock buyback. The company filed with the SEC to use some of its liquidity to buy back stocks—exactly what big tech companies Google and Apple did just a couple of weeks ago.

A Redditor did the math and found out that GME purchased 324,094 shares at an average price of $31.15 per stock, which means that out of the $110 million that was approved for stock buybacks, the company has spent just around $10 million.

Will GameStop Prices Keep Rising?

It can, but it’s highly unlikely that it will be because of the meme stock craze.

Given that there’s still $100 million left to be utilized, the prices are likely to keep rising, especially when investors start realizing the prolonged potential of this price boost and retail investors flock in for the ride.

Also, if Ryan Cohen (CEO of GameStop) is serious about turning around the company’s fortunes, as well as continuing the stock’s upward momentum, he could use the extra liquidity to make some valuable acquisitions and improve GameStop’s core business to bring the company back on track and fix the bleeding user base.

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