GameStop shares saw a significant rally of more than 37% in the premarket on Monday after Keith Gill, also known as “Roaring Kitty,” made his first post in several years. Gill, who goes by DeepF——Value on Reddit, was one of the traders who drove the meme stock craze in 2021. He attracted a large following of day traders who invested in GameStop stock and call options, leading to significant volatility in the market. Melvin Capital, a hedge fund, suffered huge losses as a result of the actions of these amateur traders, prompting financial backing from Citadel and Point72.
The frenzy surrounding GameStop’s stock price led to brokerages like Robinhood restricting trading on heavily shorted stocks due to the impact on their clearinghouse margin. This decision by Robinhood led to a class-action lawsuit filed by a user of the app, although the lawsuit was dismissed in 2023. Another lawsuit was brought against Gill, alleging that he misrepresented himself as a novice trader despite being a licensed professional. The volatility in the market also led to Congressional hearings to examine broker practices and the gamification of retail trading, involving leaders from Robinhood, Melvin Capital, Reddit, Citadel, and Gill.
Although GameStop’s stock suffered a significant drop from its all-time high of $120.75 in January 2021 to a three-year low of $9.95, the stock has recently started to recover. This resurgence in the stock price may have sparked renewed interest among traders, leading to the recent increase in the stock price. However, GameStop’s most recent earnings report painted a discouraging picture for the company, including reduced revenue and job cuts aimed at cost reduction due to competition from e-commerce firms. The company posted revenue of $1.79 billion for the fourth quarter, down from $2.23 billion in the same quarter a year earlier.
The excitement surrounding GameStop’s stock price in 2021 inspired a movie titled “Dumb Money,” with Paul Dano playing Gill in the film. The volatility in the market and the impact on various entities such as Melvin Capital and Robinhood sparked debates and investigations into broker practices and retail trading gamification. Gill, as a central figure in the meme stock craze, drew attention and criticism for his involvement in the rapid fluctuations of GameStop’s stock price. The stock market’s reaction to the actions of amateur traders and the subsequent fallout highlighted broader issues in the financial markets and prompted regulatory scrutiny.
Despite the challenges faced by GameStop and the controversies surrounding the meme stock craze of 2021, the recent rally in the stock price indicates potential optimism among traders. Gill’s return to posting on social media platforms after a hiatus may have reignited interest in GameStop stock, leading to the recent increase in the stock price. The ongoing volatility and speculation surrounding GameStop’s stock price underscore the unpredictable nature of the market and the impact of retail traders on traditional investment strategies. As GameStop continues to navigate competition in the gaming industry and financial pressures, the stock remains a focal point for investors seeking opportunities in the ever-changing landscape of the stock market.
