GameStop and AMC surge as ‘Roaring Kitty’ returns, sparking memories of 2021 meme stock frenzy

Retail investor favourites GameStop and AMC surged on Tuesday, led by posts from “Roaring Kitty” Keith Gill, reminiscent of the 2021 meme stock frenzy. GameStop climbed 60% to $48.75, hitting its highest since June 2021, while AMC gained 32% to $6.85. Gill’s return sparked chatter as short sellers faced significant losses.

Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.

SOURCE: REUTERS

By Medha Singh

May 14 (Reuters) – Retail investor darlings GameStop and AMC soared on Tuesday, as posts from “Roaring Kitty” Keith Gill raised chatter about the return of the central figure behind the 2021 meme stock frenzy.

Shares of both U.S. video game retailer GameStop and those of the world’s largest theater chain AMC more than doubled during the trading session. GameStop shares rose to the highest since June 2021, closing up 60% at $48.75. AMC shares notched the biggest gain since January 2021, finishing up nearly 32% at $6.85.

The rally began on Monday after Gill shared a meme and more than 10 clips from movies, including “X-Men Origins: Wolverine,” “The Avengers” and the 1993 Western “Tombstone.”

While the posts did not mention company names, GameStop and AMC were the most traded stocks by retail investors on Monday and Tuesday as of 10:30 a.m. ET (1430 GMT), J.P.Morgan data showed.

Gill, whose posts marked a return to social media platform X after nearly three years, is credited with sparking the so-called Reddit rally in January 2021 with bullish calls on GameStop.

“The fact that Roaring Kitty is back should be totally meaningless to the stock market (but) the fact that it isn’t is fascinating,” said Matthew Tuttle, CEO of Tuttle Capital Management.

GameStop’s shares have nearly tripled in value since Friday’s close, its market capitalization jumping to about $18 billion.

On Tuesday, short sellers lost $1.6 billion on paper, taking combined losses since Monday to $2.4 billion, analytics firm Ortex Technologies said.

“Today’s losses will put a lot of short sellers on tilt and squeeze them out of their positions with their buy-to-covers pushing GME’s stock price even higher,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Meanwhile, AMC completed a $250 million “at-the-market” share sale program on Monday as its stock surged 78% to $5.19, more than double its record low hit in mid-April.

The frenzy spread to micro-cap shares such as Headphones maker Koss, which jumped 40%. U.S.-listed shares of BlackBerry rose 12%, and food storage container company Tupperware gained 17%.

Reddit added 7%. Retail investors used the social media firm in 2021 to coordinate and target highly shorted stocks as Main Street battled Wall Street.

Retail investor-focused brokerage Robinhood, which made zero-commission trades mainstream, gained nearly 7%.

“This is ridiculous but all a part of free markets,” said Andrew Left at Citron Research, a former GameStop short seller.

Read more: Meme stocks hitting the rocks as chat room investors get fried

RETAIL FRENZY IN NEW ECONOMY

Unlike 2021, speculative trades are not likely to last long in the current economic condition, said some analysts, noting interest rates are much higher than in the era of cheap money.

“This meme rally maybe rhymes with 2021 but is unlikely a repeat,” said Ben Laidler, global markets strategist at digital brokerage eToro.

About 600,000 GameStop options contracts changed hands on Monday, compared to volumes of one million to two million contracts in early 2021, said Brent Kochuba, founder of options analytic service SpotGamma.

However, the implied volatility of GameStop options, a measure of investor expectations for price swings in the shares, jumped in the previous session to levels that rivaled 2021.

“This suggests that the reaction of market makers (increasing options prices) to a potential repeat of GameStop mania was very fast,” he said.

Institutional investors are now better equipped to handle the situation, market participants said, after the surprise collective force of individual investors cost hedge funds billions in losses three years ago.

In the past five sessions, the average retail traders’ share of total GameStop turnover was around 7% and about 10% for AMC, said Marco Iachini, senior vice president at Vanda Research.

He said that indicates large numbers of institutional investors were participating along with retail investors.

(Reporting by Medha Singh, additional reporting by Pranav Kashyap in Bengaluru and Chibuike Oguh in New York; Editing by David Gregorio and Rosalba O’Brien)

Why the sudden surge in Meme Stocks?

By Sruthi Shankar and Medha Singh

May 14 (Reuters) – GameStop and AMC Entertainment have again captured retail investors’ attention, reminiscent of “the meme stock frenzy” that gripped Wall Street three years ago, following social media posts from the leading figure behind that rally “Roaring Kitty”.

Here is what you need to know about the recent surge in meme stocks:

ROARING KITTY AND HIS SKETCH

Keith Gill, popularly known among traders as “Roaring Kitty”, shared a series of cryptic posts on social media platform X on Sunday following a three-year gap. One of them included a sketch of a man leaning forward in a chair, a popular meme among gamers that indicates things are getting serious.

With colorful YouTube streams and Reddit posts, Gill made the bull case for GameStop in 2021, helping attract a flood of retail cash into the company.

In Gill’s 2021 testimony to Congress, he denied the notion that he used social media to profit by promoting GameStop to unwitting investors.

GAMESTOP LEADS, AGAIN

Videogame retailer GameStop has rallied more than 139% since Friday close through Tuesday afternoon, set to add more than $9 billion to its market value. Theatre chain AMC Entertainment has climbed more than 130% following the two-day rally. The highly shorted shares were set for their best 2-day gains since January 2021. Still, both remain well below the 2021 highs.

The pair was also the two most traded stocks by retail investors on Monday, as per J.P. Morgan.

Retail traders also pumped up other highly shorted stocks including solar firm SunPower Corp, headphones maker Koss Corp and storage container maker Tupperware Brands , sending them soaring between 24% and 83%.

Retail market order as a percentage of total market volume increased to 17.5% on May 13 from 14.1% on May 1, J.P.Morgan data showed.

WHAT ARE MEME STOCKS?

Meme stocks refer to certain company shares that have been boosted by retail investors using trading platforms and social media investment advice.

It burst into the open during 2021 when the COVID-19 lockdowns boosted savings, policy stimulus put cash into people’s pockets and extremely low interest rates pushed investors to the stock market.

A proliferation of zero-fee trading apps also encouraged anyone with a smartphone to dabble in stocks.

Thousands of Reddit users on low-cost trading platforms such as Robinhood banded together to drive up the prices of “meme” stocks, squeezing hedge funds that had taken short positions, or bets against those shares.

HOW IS IT DIFFERENT THIS TIME?

U.S. interest rates are at multi-decade highs following the Federal Reserve’s aggressive efforts to tame inflation and the S&P 500’s gains are concentrated in the shares of a handful of megacap companies.

Many fund managers are also waiting for more commentary from “Roaring Kitty”.

Roundhill Investments last year announced the closure of its exchange-traded fund tracking the performance of meme stocks nearly two years after its launch, putting a nail in the coffin of the popular pandemic-era trade. 

(Reporting by Sruthi Shankar and Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)

Read also:

Visited 192 times, 132 visit(s) today