A man walks past a GameStop location on 6th Avenue in New York on March 23, 2021.
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GameStop Shares rose more than 40% in premarket trading on Monday after “Roaring Kitty,” the man who inspired the epic short squeeze of 2021, was released online for the first time in about three years.
The post, a picture on Reddit— since 2021.
Roaring Kitty, real name Keith Gill, is a former marketer for Massachusetts Mutual Life Insurance. Gill, also known as DeepF——Value on Reddit, attracted an army of day traders cheering each other on in 2020 and 2021, investing in brick-and-mortar video game stocks and GameStop call options.
The “meme stock” frenzy led individual investors to target short sellers and hedge funds that were pessimistic about the prospects for GameStop and other companies, forcing them to cover their short positions and driving up the price of target stocks to drive. Currently, the short position in GameStop shares is more than 24% of all of the company’s freely tradable shares, also known as the float.
The poster child was hedge fund Melvin Capital, which heavily shorted GameStop and became a target of the army of amateur traders, suffering huge losses that led Ken Griffin’s Citadel as well as Point72 to hedge Melvin’s finances with nearly $3 billion in backing.
The GameStop mania that drove the stock price from just $3 to over $120 per share (split-adjusted) in early 2021, including forced brokerages Robin Hood restrict trading in heavily shorted stocks. In response, a Robinhood user filed a class action lawsuit after the app decided to restrict GameStop trading on its platform. The lawsuit was dismissed in August 2023.
Another class action lawsuit against Gill alleged that he pretended to be an inexperienced trader despite being a licensed professional.
The volatility sparked a series of congressional hearings on brokerage practices and the gamification of retail trading, as well as testimony from executives at Robinhood, Melvin Capital, Reddit and Citadel, as well as Gill. The entire episode eventually inspired the 2023 film Dumb Money, which starred Paul Dano Gill.
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In January 2021, GameStop shares reached an all-time intraday high of $120.75, adjusted for a subsequent 4-for-1 stock split in the summer of 2022. But as interest from individual investors eventually waned, the stock collapsed along with other memes -Shares like for example AMC Entertainment Holdings. GameStop hit a three-year low of $9.95 last month.
Recently, the stock has started to rise, which, along with the huge short interest in the stock, may have revived Gill’s interest. GameStop is up 57% so far in May, closing at $17.46 on Friday.
But the fundamental business at GameStop, as evidenced by its most recent earnings report, paints a discouraging picture at the video game company. In late March, GameStop said it was cutting an unspecified number of jobs to cut costs and reported lower fourth-quarter sales due to increasing competition from e-commerce-based rivals.
GameStop reported fourth-quarter revenue of $1.79 billion, compared to $2.23 billion in the year-ago quarter.
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2024-05-13 13:06:57
www.cnbc.com
