GameStop hits highest since 2021 as 'Roaring Kitty' brings back meme stock mania (updated)
14/05/2024 19:31
(Updates prices throughout)
By Medha Singh
May 14 (Reuters) - Retail investor darlings GameStop
GME.N and AMC AMC.N 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 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, last up 44% at $43.61. AMC shares notched the biggest gain
since January 2021, last up 33% at $6.83.
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, J.P.Morgan data showed.
That was mainly because Gill, who is returning 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 $16
billion.
On Tuesday, short sellers have 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 KOSS.O which jumped 29%. U.S.-listed shares of
BlackBerry BB.N rose 10%, and food storage container company
Tupperware TUP.N gained 7%.
Reddit RDDT.N added 7.4%. 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 HOOD.O , which
made zero-commission trades mainstream, gained 6%.
"This is ridiculous but all a part of free markets," said
Andrew Left at Citron Research, a former GameStop short seller.
RETAIL FRENZY IN NEW ECONOMY
Unlike 2021, speculative trades are not likely to last long
in the current economic condition, 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, far below the 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.
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Despite recent rally, GameStop far from record levels https://tmsnrt.rs/3wqbVk5
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(Reporting by Medha Singh, additional reporting by Pranav
Kashyap in Bengaluru and Chibuike Oguh in New York; Editing by
Krishna Chandra Eluri, Arun Koyyur and David Gregorio)
((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; X, formerly
Twitter: @medhasinghs;))