No one in their wildest imagination would have ever thought that a meme could rally the shares of a struggling company. But a trader, who gave birth to the meme stock phenomenon in 2021, has returned and investors have taken notice.
Keith Gill, popularly known as Roaring Kitty, has returned to the social media platforms after a three-year hiatus. Gill posted an image that shows a man sitting on a chair, leaning forward with a gaming console in hand.
A meme stock refers to the shares of a company that has become popular on social media platforms due to heightened social sentiment.
In 2021, GameStop, the primary stock in the meme stock mania, had shared the same stock in February. The meme is interpreted as “when things get serious”, according to Know Your Meme, an internet meme database.
That simple post on X led to GameStop shares jumping 74 percent on May 13, reminding investors about the meme stock frenzy three years ago. The stock had skyrocketed 119 percent during the day and trading had to be halted several times because of the volatility.
Why is the market reacting to Roaring Kitty’s post? Who is he exactly?
Gill, who goes by the name ‘Deepf******value on Reddit, was one of the driving voices on the WallStreetBets that propelled GameStop's massive rally.
He was born in Brockton, Massachusetts, on June 8, 1986. He was also a track and field player during his high school days before working at a unit of MassMutual as its director of education and wellness, according to a Wall Street Journal and Investopedia report. He had joined the social media platform X, formerly known as Twitter, in 2014. He had joined YouTube in 2015 and Reddit in 2019.
The meme stock rally led to a US Congressional hearing following reports of manipulation by Wall Street firms. It was reported during the time that Robinhood, a trading app, had halted the trading of GameStop stocks after being under pressure from several hedge funds that were facing losses.
Also read: GameStop surges over 70% after trader 'Roaring Kitty' resurfaces with X post
During the hearing, Gill said he was a casual day trader and denied he was out to fuel the meme stock frenzy of 2021. He believed the stock was an attractive opportunity for investors. “I just like the stock,” Gill had famously said.
How the GameStop mania unfolded
In 2021, traders started betting on the US-based video game retailer, setting up a David vs Goliath battle between small traders and hedge funds which were betting against the survival of the company by shorting the retailer’s stock.
Gill and several others, who agreed with him, reshaped the trajectory of a company that appeared to be headed for bankruptcy by buying up thousands of GameStop shares in the face of almost any accepted metrics that told investors that the company was in serious trouble.
That began what is known as a ‘short squeeze’, when those big investors that had bet against GameStop were forced to buy its rapidly rising stock to offset their massive losses.
The shares of a few other firms such as AMC Entertainment and Bed Bath & Beyond also soared in 2021 following the rally in GameStop.
The shares of GameStop jumped over a whopping 1,000 percent in 2021, while the struggling movie theatre chain AMC recorded a jump of 2,300 percent in a very short period of time. These massive returns led to several well-known hedge funds such as Citron Research and Melvin Capital losing an estimated $5 billion, a report by analytics firm S3 Partners said.
Gill, who had invested around $53,000 in 2019 in GameStop, had made $48 million at the peak of the meme stock frenzy, according to reports. The stock price of the retailer had touched a peak of $483 in 2021, according to CNN. It is not known if Gill sold his stocks during or after the meme stock rally.
Dumb Money review: Spectacular cast delivers the goods in film about GameStop short squeeze
The story of Roaring Kitty and the meme stock craze was turned into a movie last year called ‘Dumb Money’.
What happened on May 13 after Gill’s first post in 3 years?
Apart from the surge in GameStop stock, AMC Entertainment gained 78 percent, Reddit shares climbed 9 percent, and the shares of Robinhood Markets rose 4 percent.
Short sellers reported over $1 billion in mark-to-market losses betting against GameStop on May 13.
“That he is able to generate a crowd says that the crowd is back to feeling FOMO and YOLO in an enormous way,” said Peter Atwater, president of Financial Insyghts and an adjunct professor at William & Mary and the University of Delaware. “When people dive into things that are of pure speculative value, their confidence is extremely high and this is one of the ways that it manifests.”
With inputs from agencies.
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