GameStop soars as "Roaring Kitty" returns, raising speculations of another meme stock rally

The US witnessed a probable sequel to the 2021 meme-stock frenzy last week. Shares of the American video game retailer GameStop jumped nearly 179 percent. It wasn’t any good news about the company that drove the share prices; in fact, GameStop is currently in very bad shape.

Why did GameStop’s share prices surge? GameStop is a meme stock. Meme stocks are stocks that gain popularity through hype on social media. Small, individual investors often start buying a company’s stock after being influenced by investment advisers on social media. AMC, Blackberry, and Bed, Bath, and Beyond are some other popular meme stocks.

Who is hyping up GameStop stocks?

A social media post pushed the share prices of GameStop and other meme stocks. The post was made on the social media platform X by an account that went by the name of “Roaring Kitty.” This account is managed by Keith Gill. Gill is an American stock market investor, but he is more popular for his YouTube channel, where he advises people on stock market investment. In 2021, his market advice on his social media platforms helped push GameStop’s share prices to historic highs.

Keith Gill has been inactive on social media for the last two years, but now he has resurfaced. Gill’s post on X showed a sketch of a man leaning forward in a chair. This is a popular meme among gamers. It indicates that things are getting serious. While these posts didn’t mention GameStop directly, Roaring Kitty’s comeback was enough to encourage people. They started heavily buying shares of GameStop, and just on May 13th, more than 175 million GameStop shares changed hands.

2021 GameStop Rally

To understand this better, let’s go back to 2021. At the time, GameStop’s business was on the brink. The firm’s sales had been consistently declining for years, which impacted the firm’s share prices as well. By mid-2020, GameStop’s shares had dropped to nearly 60 cents.

In this dire condition, social media came to the rescue. A group of Reddit users helped create hype about GameStop’s shares. It was in a subreddit called “WallStreetBets.” By the end of 2020, users on this forum started buying GameStop’s shares. They encouraged others to do the same and used memes to drive this trend. As more small and individual investors joined in, GameStop’s stock soared to incredible heights. In January 2021, shares of GameStop surged as much as 21-fold over two weeks.

Keith Gill, also known as Roaring Kitty, was considered key in driving up stock prices. He shared analyses and encouraged others to buy the stocks. His influence was huge in the GameStop rally.

What Was Driving Online Investors?

But what motivated these online investors to buy GameStop? Well, there were a couple of factors, but the most important one was people’s desire to punish Wall Street and its big players.

At the time, people were under a COVID-19 lockdown. Many were losing their jobs; however, big financial corporations were at the other end, and this frustrated people. For a group of Redditors, GameStop became a medium to punish corporations. Their first target was the short sellers of the stock market.

Short sellers are different from usual stock traders. They are typically hedge fund managers. Unlike usual traders, short sellers bet on a stock’s price going down. They often target struggling firms to make a quick buck.

By mid-2020, GameStop was in this situation. The short sellers analysed the company’s weaknesses, and they started betting on its stock prices declining.

However, the situation didn’t exactly pan out as they expected. As short sellers put their bets against GameStop, Reddit users took note. Financial influencers like Roaring Kitty and others hyped GameStop’s shares. As more small investors joined in, GameStop’s stock soared. This led to short sellers facing massive losses. One investment firm, Melvin Capital, was even forced to shut down.

GameStop Stocks Crash

But what goes around comes around. These Redditors were largely using the U.S.-based trading app Robinhood to carry out their transactions. As Robinhood took note of the situation, it decided to act. On January 28th, 2021, Robinhood stopped users from buying GameStop shares, and suddenly, all the hullabaloo came to a standstill. The Redditors couldn’t buy the shares, and GameStop’s meteoric rise came to a halt.

This decision caused panic among investors. Many started selling their shares in the company, and as sales increased, GameStop’s stock price plummeted.

What followed were days of stock market volatility. A Congressional hearing also took place. Keith Gill was asked to testify, and with that, Gill dwindled from the limelight. But now that he has made a comeback, things have started to heat up.

Some analysts say 2021’s meme rally is very unlikely to repeat. This time around, they are banking on investors to be more rational. They hope investors will focus on GameStop’s financial condition before investing. However, some experts think otherwise. They believe the 2021 saga could repeat itself, and if that happens, the stock market is likely in for another wild ride.