Gamestop's Stock Soars After the Resurfacing of 'Roaring Kitty'

GameStop (GME.N) experienced a remarkable surge of 70% in its share price on Monday, driven by the return of "Roaring Kitty," a former marketer known for his role in the 2021 meme stock frenzy. After a three-year absence from social media, Roaring Kitty reappeared on X.com, igniting investor enthusiasm. This resurgence propelled GameStop shares to reach an 18-month peak at $38.20, triggering multiple halts due to volatility and marking the most significant single-day percentage gain since 2021.

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The rally of the Grapevine, Texas-based company also had a ripple effect, bolstering other meme stocks that had previously faced adversity. AMC (AMC.N) surged by 27%, while Koss Corp (KOSS.O) saw a notable increase of 23%. Keith Gill, famously known as "Roaring Kitty" on YouTube and "DeepF***ingValue" on Reddit, played a pivotal role in the Reddit rally of 2021, during which GameStop shares skyrocketed by as much as 21-fold over a fortnight in January before plummeting back to pre-surge levels.

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Gill's return to social media was marked by a cryptic post featuring a meme widely recognized among gamers, signaling a serious tone without any accompanying caption. Despite numerous attempts to reach out, "Roaring Kitty" refrained from providing any immediate comment to Reuters. At 11 a.m. ET, data from J.P. Morgan revealed that GameStop and AMC were the most actively traded stocks among retail investors.

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Art Hogan, chief market strategist at B Riley Wealth, cautioned against categorizing participants in this phenomenon as traditional investors, emphasizing the lack of fundamental changes in the companies driving the meme stock frenzy. GameStop's recent cost-cutting measures, including unspecified job cuts in March, coupled with lower fourth-quarter revenue, underscored the company's ongoing struggles despite its recent stock price surge.

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Although GameStop shares had climbed over 57% in May leading up to Friday's close, they remained significantly below their peak of $120 in 2021. Thomas Hayes, chairman at Great Hill Capital LLC, suggested that the conditions leading to the meme stock mania of 2021, such as individuals having disposable income during lockdowns, were unlikely to recur, tempering expectations of a sustained resurgence.

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The meme stock frenzy in 2021, sparked by Gill's posts on Reddit's Wallstreetbets, caused a domino effect that extended to other heavily shorted stocks like AMC. Reddit users collaborated to squeeze bearish hedge funds, resulting in substantial losses and regulatory scrutiny. The cinematic portrayal of this event in Craig Gillespie's 2023 movie "Dumb Money" encapsulated its cultural impact.

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Analytical firm Ortex estimated that about a quarter of GameStop's publicly available shares were held in short positions, potentially causing bearish investors to incur losses of $1.23 billion on Monday. Short sellers, who sell borrowed stocks with the intention of repurchasing them later at a lower price, faced a shortage of GameStop shares available for borrowing on platforms like Interactive Brokers.

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Meanwhile, options activity for GameStop surged in May, with open interest in call options peaking at 588,205 on May 10 before slightly retracting to 501,296 on Monday. Chris Murphy, co-head of derivatives strategy at Susquehanna, speculated that institutional investors, wary of the events of 2021, might opt to abstain from shorting GameStop this time around.

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