(NewsNation) — Gamestop’s shares surged in early trading Monday after a Reddit account associated with the trader known as “Roaring Kitty” appeared to reveal a big stake in the video game retailer that may be worth millions.
GameStop’s stock jumped more than 37% in morning trading.
The increase comes after a Reddit account linked to Keith Gill, better known as “Roaring Kitty,” shared a screenshot on Sunday evening that many speculate could be an image of the shares and call options Gill holds in GameStop.
According to the image, Gill may hold 5 million shares of GameStop worth $115.7 million as of the closing price on Friday. The screenshot also showed 120,000 call options in GameStop with a $20 strike price that expires on June 21.
Monday’s surge is GameStop’s second rally in as many months and both appear to have been driven by social media buzz.
In May, GameStop Corp. (GME) shares soared 140% over just a few days after Gill appeared online for the first time in three years. RoaringKitty’s return also pushed up shares of another so-called “meme stock,” AMC Entertainment Holdings, Inc. (AMC).
Gill led the way three years ago when GameStop and AMC created overnight fortunes and upset major players on Wall Street. His story and the 2021 meme stock craze were turned into a movie last year called “Dumb Money.”
Peter Earle, senior fellow at the American Institute for Economic Research, recently joined “NewsNation Now” to break down the companies’ resurgence on the stock market.
How did this start and who is Roaring Kitty?
Gill was a discussion leader on a Reddit message board called r/wallstreetbets in 2021.
“He essentially thought that GameStop was deeply undervalued, so he bought it, and, as it turned out, the company had a very high shortage,” Earle said. “Now, that means that a lot of professional investors had bet against it.”
If the stock price began rising quickly, those who bet against it may have needed to buy back their stocks, he said.
“You can get a situation called a short squeeze, where the stock price rockets upward in a way that’s beyond any fundamental value of the company, and that’s what happened — not only with GameStop but then with AMC and a bunch of other companies,” Earle said.
After three years of silence, Gill posted to social media in May and caught the public’s attention.
Under his username “Roaring Kitty,” Gill posted a photo of a man sitting forward in his chair on social platform X. It’s a meme gamers use when things are getting serious.
He followed up with a YouTube video from years earlier saying, “That’s all for now cuz I’m out of breath. FYI here’s a quick 4min video I put together to summarize the $GME bull case.”
“It looks like Mr. Gill has reemerged from whatever slumber or recess he was in, and it’s happening again,” Earle said. “To a lesser extent, but we’re still seeing a big move in that stock.”
Why are these meme stocks soaring right now?
GameStop shares fell steadily after the 2021 short squeeze but shot up after Gill’s return and then again after the latest screenshot. There’s no consensus explanation for Gill’s resurgence and the growth that accompanied it, but Earle has a theory.
On April 22, GameStop stock hit $10.01 per share — its lowest price since the short squeeze in January 2021.
“Since Mr. Gill … claims to be a value investor, which is someone who looks for stocks that are undervalued, it may be that the decline of the stock hit a level after 3 1/2 years that made him want to get involved again,” Earle said.
As of Monday, the GameStop share price remains highly volatile.
Should you invest?
Big hedge funds and other professional investing firms are better equipped to handle the situation this time around, Marco Iachini, senior vice president at Vanda Research, told the Associated Press.
Hedge funds and investing firms could wait longer before pulling out this time, leaving smaller investors to bear the risk.
“Do we think more retail traders can jump in on the trend in the coming days? Yes,” Iachini said. “Do we think this is a repeat of 2021? No, and the chances we reach that stage are low.”
Earle warned potential investors to “be very careful and look for greener pastures.”
“It’s a very risky situation,” Earle said. “Most people would probably be wise to stay away from it, but it looks like ‘Dumb Money’ is going to have a sequel.”
The Associated Press contributed to this report.
