In a surprising turn of events, the return to social media of the infamous meme stock captain during the pandemic era led to a significant boost in shares not only for GameStop but also several other meme stocks. GameStop shares rose by an impressive 74%, marking their largest one-day gain since February 2021 and closing at their highest level since August 2022. Additionally, shares of AMC, another popular meme stock, rallied by 78%, achieving their best day since June 2021 and reaching their highest price since January. This sudden surge in meme stocks also benefited other related entities such as social media firms Reddit and Trump Media, as well as the cryptocurrency token dogecoin, resulting in significant gains for those invested in these assets.
The substantial gains experienced by these meme stocks came amidst a rather uneventful trading session for the broader market, with the S&P 500 falling slightly by less than 0.1%. Despite the lack of any major news or catalysts for the companies, the resurgence in meme stocks was attributed to the reappearance of “Roaring Kitty,” a 37-year-old individual known as Keith Gil who became the face of the 2020-21 short squeeze involving GameStop and AMC. This social media event reignited the enthusiasm of retail investors, particularly those congregating on Reddit’s WallStreetBets forum, who pushed against institutional investors betting against the success of these companies.
The resurgence in GameStop’s shares had a significant impact on short sellers, resulting in paper losses exceeding $1 billion, according to S3 Partners data. This development prompted comparisons to the losses experienced in 2021 by finance magnates like Gabe Plotkin, whose hedge fund suffered billions in losses due to the failed GameStop short. While some retail investors benefited financially from Monday’s gains, it was billionaires who reaped the most rewards. GameStop’s CEO and largest individual shareholder, Ryan Cohen, saw an increase of approximately $480 million in his net worth, reaching $4.2 billion. Similarly, former U.S. President Donald J. Trump, who owns 85% of his social media company, added $100 million to his fortune, bringing his net worth close to $8 billion.
Meme stocks are characterized by their volatile nature and erratic price swings, often influenced by minimal information impacting the company’s operations. These stocks typically have a unique ownership base, with a higher percentage of retail investors and insiders compared to mainstream equities. This phenomenon is exemplified by the low institutional ownership of meme stocks like Trump Media and GameStop, contrasting with high institutional ownership of more established companies such as Microsoft. The unpredictable nature of meme stocks was further demonstrated by the bankruptcies of former meme stocks like Bed Bath & Beyond and WeWork.
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