As the meme stock fever returns, GameStop shares rise 70%

Tuesday’s spike in GameStop shares continued the meme stock surge that was sparked by “Roaring Kitty’s” debut online post in three years.

After rising 74% on Monday, shares of video game retailer GameStop climbed 70% higher before being put on hold.

Even after the chain of movie theaters raised roughly $250 million in fresh equity capital during Monday’s frantic trade, AMC surged 90%. A number of stops were placed on its shares during early trade.

On Tuesday, shares of other memes stocks opened significantly higher. BlackBerry’s once-dominant smartphone shares fell 17%, while Koss, a manufacturer of headphones, saw a 40% increase in shares.

A recent social media post by Roaring Kitty seems to have rekindled the meme stock phenomenon.

The man, whose real name is Keith Gill, shared a meme of a video gamer leaning forward in their chair on the X platform.

This meme is used by players to show that they are paying attention to the game.

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With over 23 million views since then, it was Gill’s first post on the platform since 2021.

Gill responded by sharing a number of brief clips from well-known TV series and films, some of which had dubious meanings.

Neil Wilson, president and chief market analyst at Finalto, wrote in a note that “it looks like retail investors are becoming more bullish again and willing to take on more risk.”

“GME’s most recent earnings report was appalling, so there isn’t a fundamental reason for the move as such.”

In response to growing competition from e-commerce-based rivals, GameStop announced reduced fourth-quarter revenue in late March and said it had eliminated an undisclosed number of workers to save costs.

Key Points

• Tuesday saw a resurgence of the pandemic-era meme stock craze, which drove up shares of GameStop and AMC.

• Other ‘ meme stocks,’ including Koss and Blackberry, also crashed.

• Keith Gill, better known online as “Roaring Kitty,” started the meme stock uprising on Monday with his first post online in three years.

“Unmistakably” mirrors the story of 2021.

Gill used to work as a Massachusetts Mutual Life Insurance marketer. Known on Reddit as DeepF——Value, he oversaw a horde of day traders who piled into GameStop call options and brick-and-mortar video gaming stocks between 2020 and 2021, encouraging one another.

The intention was to increase the share prices of some formerly disliked firms in order to exert pressure on hedge funds that had been betting on a decrease in their value.

When interest in meme stocks waned, GameStop’s shares—which had reached an all-time intraday high of $120.75 in January 2021—collapsed as well. In recent years, GameStop’s stock price has been declining; this month, it hit a three-year low of $9.95. On Monday, they closed at $30.45.

As of Monday’s end, the losses for GameStop short sellers were projected by analytics firm Ortex Technologies to be $868 million, and for May, they stood at $1.26 billion.

Ortex Technologies reported early on Tuesday that GameStop short sellers had lost an additional $1.04 billion, bringing their total losses for May to well over $2.3 billion, at a share price of $46.

“The situation unmistakably echoes the events of January 2021, with GameStop’s short interest nearing 25% of the free float, the highest level since 2022, and a staggering 150% price increase in less than two days,” an Ortex Technologies spokeswoman emailed CNBC.

It is noteworthy that there are no signs indicating holders of short positions have started to close their positions.

Monitoring short interest levels is essential in such a volatile market environment because these indicators show when short sellers begin to reduce their holdings, which could put further purchasing pressure on the stock, they continued.

A short selling technique involves investors borrowing shares at a fixed price with the expectation that, when it comes time to pay for the borrowed shares, the market value will drop below that amount. 

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