This week, Wall Street is witnessing a resurgence in meme stock activity, reminiscent of the dramatic events surrounding GameStop Corp (NYSE: GME) in 2021.
A new wave of retail traders has significantly driven up the price of GameStop, the video game retailer that gained fame for its extraordinary rally two years ago. This rally led to widespread media coverage, including a Netflix series, a movie, and considerable financial scrutiny, culminating in heavy losses for those who failed to navigate the rapid fluctuations effectively.
So far today, in premarket trading, GameStop’s stock is enjoying a price increase of 74.4%, following a 70% jump on Monday, boosting the company’s market value by billions.
Source: Google Finance
AMC Entertainment (NYSE; AMC), a movie theater chain, experienced a similar uplift, as did various lesser-known cryptocurrencies associated with Roaring Kitty and GameStop.
The revival of interest in GameStop can be traced back to Keith Gill, known online as Roaring Kitty, who returned to social media after a three-year absence. On Monday night, Gill posted a series of enigmatic video clips on his X account, sparking renewed interest in the stocks he previously championed. Despite not directly mentioning GameStop, his return triggered a flurry of activity akin to the original meme stock craze of 2021 and 2022, when stocks like GameStop and AMC saw their prices skyrocket by over 1,000%.
As The New York Times (NYT) reported, according to Steve Sosnick, chief strategist at Interactive Brokers, investors have been buying a significant number of GameStop call options, betting on continued price increases. Sosnick noted that this surge in activity wasn’t prompted by any substantial news about GameStop or AMC but rather by the renewed attention from Roaring Kitty’s social media presence. Sosnick expressed skepticism about the sustainability of this rally, citing his past experiences with similar phenomena.
The sharp increase in GameStop’s stock price has resulted in significant losses for short sellers, who had previously bet on a decline. Ihor Dusaniwsky, managing director of S3 Partners, told the NYT that GameStop shorts, which had accumulated $392 million in profits earlier this year, faced losses amounting to $852 million by the end of Monday.
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