Meme stocks are back as legendary trader returns, leaving shorters in disbelief
Remember meme stocks?
In early 2021, the stock price of video game retailer GameStop pumped immensely after a Reddit community of traders, led by a trader known as Roaring Kitty (or DeepFuckingValue on Reddit), started buying en masse. This in turn caused the demise of hedge fund Melvin Capital that was shorting GameStop stock (shorting, in the simplest of terms, is betting on the stock price declining). It also marked the beginning of a trend in which communities of smaller traders were able to substantially move the prices of certain stocks, often opposing the directional bets of larger entities such as hedge funds. That was the dawn of the meme stock era.
While the trend was short lived, largely dying down in late 2021, it now appears to be back. On Monday, after nearly three years of dormancy, Roaring Kitty’s account on X started posting a series of memes and crypto video excerpts. While it’s hard to discern what, exactly, each of them means, the consensus is that Roaring Kitty is back in business, and stock traders have taken notice.
After lingering in the $ 10 to $ 18 region for nearly the entirety of 2024 so far, the price of GameStop (whose stock ticker is $ GME) soared to $ 80 in the past two days, before settling down at the current (premarket) price of $ 51.31. The price of another meme stock, AMC Entertainment, more than doubled at one point, following Roaring Kitty’s return.
For those who were shorting $ GME and $ AMC, the news was not good. According to Predictive Analytics’ Ihor Dusaniwsky, shorters are down well over $ 2 billion this week.
How can one man’s tweets move stock prices so violently? Keith Gill, Roaring Kitty’s real name, achieved fame by holding a long position (essentially, betting on the price rising) in GameStop for years, turning a relatively meager $ 53,000 position into tens of millions of dollars and gaining a cult following in the process.
The question on every trader’s mind, however, is whether the trend of meme stocks pumping is sustainable, or if it’s a one-off event spurred by Roaring Kitty’s return (some have pointed out that Roaring Kitty hasn’t been active on other social channels such as YouTube, indicating someone else may have been tweeting from his account).
Right now, there’s no definitive answer. Roaring Kitty’s Twitter account is still posting riddles, with some Reddit traders capitalizing on the stock price moves. The ranking of Robinhood on Apple’s App Store has gone sharply up in the past couple of days, which is another indicator that retail investors are back (in early 2021, Robinhood soared to the top of Apple’s app store as numerous investors joined in to trade meme stocks). The trend could fizzle out or it could once again wreak havoc in investing circles. One thing is certain: This time around, the professionals are taking notice.