GameStop's Rally Resumes In May - What Sparked The Interest?

May 13, 202413:21 UTC

GME

AMC

HOOD

GameStop Corporation GME stock soared in premarket trading on Monday amid possible retail investor interest following a social media post by Roaring Kitty.

Shares of struggling video game retailer GameStop surged around 60% in May from $10.91 on May 1 to $17.46 today but remain far from the peak of around $81.2 in 2021.

“Roaring Kitty,” a.k.a Keith Gill, a social media persona whose online posts reportedly sparked a trading frenzy in the so-called ‘meme stock’ in early 2021, returned on X.com (formerly Twitter) after three years.

GameStop stock also gained on Friday on heavy volume as traders circulated a screenshot of The Roaring Kitty’s X account showing the account liked a post from February, referencing the film, “Run, Lola, Run.

On Sunday, Gill shared a drawing depicting a man leaning forward in a chair, a widely recognized meme among gamers signaling heightened intensity or seriousness.

It is his first post on X after being notably absent on social media platforms since mid-2021.

In March, GameStop reported first-quarter earnings that came below the consensus, sending the shares trade lower.

Gill’s Reddit posts in the Wallstreetbets group, boasting about his profits from investing in GameStop, ignited the meme stock frenzy of 2021.

The rally had spread to highly shorted stocks, including AMC Entertainment Holdings Inc AMC, as Reddit users banded together to squeeze hedge funds who had bet against GameStop and other firms.

Roaring Kitty sparked a frenzy among day traders, who rallied to invest heavily in GameStop stocks and call options from 2020 to 2021.

This collective action caused a short squeeze, resulting in GameStop shares skyrocketing by 1,700%.

This movement targeted hedge fund Melvin Capital, which was betting against GameStop and suffered significant losses.

Citadel and Point72 injected nearly $3 billion to stabilize Melvin’s finances.

The craze led to trading restrictions on platforms like Robinhood Markets Inc HOOD due to clearinghouse margin issues, prompting a class-action lawsuit dismissed in August 2023.

Gill faced another lawsuit, accusing him of misrepresenting himself as a novice trader despite being a licensed professional.

The events of 2021 were later adapted into the movie “Dumb Money,” with Paul Dano portraying Gill.

This phenomenon, known as meme investing, shook Wall Street, and the Reddit group WallStreetBets introduced a novel approach to investing.

Read Next: Reddit, Social Media Giant Behind GameStop Saga, Plans $10B March IPO.

Price Action: GME shares are up 45.10% at $25.34 during the premarket session at last check Monday.

Photo Courtesy 1take1shot On Shutterstock.com