US Markets
Monday, May 13th, 2024 2:03 pm EDT
Key Points
- GameStop shares surged over 80% following the return of “Roaring Kitty,” the alias for Keith Gill, a key figure in the 2021 short squeeze, who posted online for the first time in three years. Gill, also known as DeepF——Value on Reddit, drew a community of day traders who rallied around GameStop and its call options.
- The meme stock frenzy involved individual investors targeting short sellers and hedge funds, forcing them to cover their positions and driving up stock prices. Melvin Capital, heavily shorting GameStop, faced significant losses, leading Citadel and Point72 to provide nearly $3 billion in financial support.
- The volatility prompted congressional hearings and a class-action lawsuit against Robinhood for limiting trading in heavily shorted stocks. Another lawsuit alleged that Gill misrepresented himself as a novice trader. Despite recent price surges, GameStop’s fundamental business remains concerning, with declining revenue and cost-cutting measures reported in its most recent earnings report.
The recent surge in GameStop shares, soaring over 80% on Monday, was sparked by the return of “Roaring Kitty,” also known as Keith Gill, the catalyst behind the dramatic short squeeze of 2021. Gill, a former marketer for Massachusetts Mutual Life Insurance, gained prominence as DeepF——Value on Reddit, rallying a community of day traders around GameStop and its call options between 2020 and 2021. This phenomenon, dubbed the “meme stock” frenzy, saw individual investors targeting short sellers and hedge funds, forcing them to cover their positions and driving up stock prices. Notably, Melvin Capital faced substantial losses due to its heavy shorting of GameStop, prompting financial support from Citadel and Point72. The frenzy led to congressional hearings on retail trading practices, with Gill among the testifying leaders. Despite the volatility and legal challenges, including a dismissed class-action lawsuit against Robinhood and allegations against Gill for misrepresentation, interest in GameStop has resurged, possibly due to its high short interest. However, the company’s fundamental business remains concerning, with recent earnings reports showing declining revenue and cost-cutting measures. While GameStop’s recent price surge may suggest renewed investor interest, its long-term outlook remains uncertain amidst challenges from e-commerce competitors and evolving market dynamics.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/05/13/gme-jumps-as-trader-roaring-kitty-who-drove-meme-craze-posts-again.html
