GameStop shares have experienced a rollercoaster ride in the stock market, with a recent rally of over 40% in premarket trading. This surge came after “Roaring Kitty” (Keith Gill), the man behind the epic short squeeze of 2021, made a comeback online for the first time in three years. Gill, a former marketer for Massachusetts Mutual Life Insurance, gained attention as DeepF——Value on Reddit. He inspired a wave of day traders to invest in GameStop, leading to a frenzy that shook the financial world.
The GameStop mania in early 2021 involved individual investors banding together to squeeze out short sellers and hedge funds that bet against the company. This resulted in a meteoric rise in GameStop’s stock price, from as low as $3 to over $120 in just three months. Hedge fund Melvin Capital, a major short seller of GameStop, faced substantial losses and required financial support from Citadel and Point72 to cover their positions.
As the GameStop saga unfolded, brokerages like Robinhood faced backlash for restricting trading in heavily shorted stocks. This move sparked a class-action lawsuit against Robinhood, which was later dismissed. Another lawsuit targeted Gill for allegedly misrepresenting himself as a novice trader despite his professional background. The volatility in GameStop’s stock price also led to Congressional hearings on retail trading practices and the gamification of investing.
Despite the recent resurgence in GameStop’s stock price, the company’s fundamental business remains concerning. Job cuts and declining revenue in the fourth quarter paint a bleak picture of the video game retailer’s future. While the stock has shown some recovery, driven in part by the high short interest, the underlying challenges faced by GameStop are evident. As of the latest data, GameStop closed at $17.46, up 57% in May.
The GameStop saga, fueled by Roaring Kitty and the meme stock frenzy, has left a lasting impact on the financial markets. The events of 2021 highlighted the power of retail investors to influence stock prices and challenge established players in the industry. While the stock may continue to see fluctuations, the underlying weaknesses in GameStop’s business model raise concerns about its long-term sustainability. Investors and observers alike will be watching closely to see how the story of GameStop unfolds in the coming months.