Roaring Kitty’s Return Sparks GameStop Rally as Meme Stock Mania Resurfaces

Shares of video game retailer GameStop jumped 98% on Tuesday, extending the meme stock rally that started after “Roaring Kitty” made his first online post in three years. This follows a 74% advance on Monday. Other so-called “meme stocks” such as AMC, BlackBerry, and Koss also opened sharply higher on Tuesday.

The meme stock phenomenon appears to have been reignited by a recent social media update from Keith Gill, also known as “Roaring Kitty” or DeepF——Value on Reddit. Gill posted a picture on the X platform of a video gamer sitting forward on their chair, a meme used by gamers to indicate they are taking the game seriously.

Keith Gill's Online Resurgence

Keith Gill’s post marked his first on the platform since 2021 and has been viewed more than 23 million times. He followed up with a series of posts of short videos from popular TV shows and movies, although the meaning behind some of them was unclear.

Gill also shared a YouTube video from years before when he championed the beleaguered company GameStop, saying, “That’s all for now cuz I’m out of breath. FYI here’s a quick 4min video I put together to summarize the $GME bull case.”

In late March, GameStop reported lower fourth-quarter revenue amid rising competition from e-commerce-based competitors and announced job cuts to reduce costs. However, the recent surge in the company’s stock price is not attributed to any fundamental reasons.

Short Sellers Face Mounting Losses

Analytics firm Ortex Technologies estimated that losses for GameStop short sellers came in at $868 million as of Monday’s close and stood at $1.26 billion for May. At the price of $46 per share early Tuesday, Ortex Technologies said GameStop short sellers had lost a further $1.04 billion, pushing total losses for May to just over $2.3 billion.

The current situation echoes the events of January 2021, when Gill and an army of day traders drove up shares of certain previously unloved companies, putting pressure on hedge funds that had been betting they would decline in value.

GameStop’s short interest is nearing 25% of the free float, the highest level since 2022. Trading in GameStop was halted eight times before noon on Monday due to volatility.

Evolving Market Dynamics

The dynamics of the market have changed since the initial meme stock craze in 2021. When Gill and retail investors began buying up shares of GameStop, more than 140% of the company’s tradeable shares were being shorted.

The short positions against GameStop’s tradeable shares now stand just over 24%, slightly more than the 22.5% recorded in January. The company reported its first annual profit since 2018 in January, although it remains unclear if CEO Ryan Cohen’s turnaround plan will succeed.

Gill reaped a big profit investing in a troubled video-game company, but denied when he appeared virtually at a Congressional hearing that he used social media to drive up GameStop’s stock price. He told lawmakers at the time simply, “I like the stock.”

The Meme Stock Legacy

As Roaring Kitty, Gill had vanished from messaging boards after posting a video in June 2021 of kittens going to sleep. The story of Roaring Kitty and the meme stock craze was turned into a movie last year called “Dumb Money.”

The recent surge in GameStop shares and other meme stocks has once again brought attention to the power of retail investors and the potential for market volatility. While the long-term success of GameStop’s turnaround plan remains to be seen, the renewed interest in meme stocks has undoubtedly shaken up the market.

The meme stock phenomenon has highlighted the influence of social media and online communities on financial markets, challenging traditional investment strategies and raising questions about market efficiency and regulation.