The recent rally of Chewy shares was triggered by a picture posted by Roaring Kitty, also known as Keith Gill, on social media platform X. The image, which resembled the logo of the online pet food retailer, caused the stock to surge by as much as 34% to $39.10. However, these gains were short-lived as the stock quickly fell back into negative territory by the end of the trading session.
Roaring Kitty has a history of influencing trading in speculative stocks like GameStop through cryptic images and memes. There is a strong connection between GameStop and Chewy, as GameStop’s CEO, Ryan Cohen, was previously the founder and CEO of Chewy. Cohen’s involvement in PetSmart’s acquisition of Chewy in 2017 and its subsequent IPO in 2019 has also played a role in the meme stock frenzy. After joining the GameStop board in 2021, he eventually took over as CEO in 2023, leading to a turnaround in the company’s performance.
During the pandemic, pet retailers like Chewy experienced a surge in sales as consumers adopted pets and purchased accessories for them. However, as the pandemic subsided and people resumed normal activities, the demand for pet-related items decreased. This shift led to a decline in revenue from higher margin categories like toys and cages, while pet food sales remained strong.
Keith Gill, a former marketer for Massachusetts Mutual Life Insurance, gained notoriety for encouraging retail investors to buy GameStop shares in 2021, triggering a short squeeze against hedge funds. His actions led to congressional hearings on brokers’ practices and the impact of retail trading on financial markets. Gill’s influence on meme stocks and the “gamification” of trading has raised concerns about market manipulation and speculative behavior.
The recent rally in Chewy shares highlights the influence of social media and meme stocks on stock prices. The connection between GameStop and Chewy, as well as Keith Gill’s role in fueling retail investor enthusiasm, reflects the changing dynamics of the financial markets. As investors navigate through these uncertain times, it is crucial to consider the underlying fundamentals of companies and avoid speculative trading based on social media trends.