GameStop shares continue rally amid meme stock resurgence
GameStop shares soared on Tuesday as the meme stock trading craze of 2021 showed signs of returning to markets three years on.
The video game retailer’s shares rallied 132% in pre-market trading, before falling back to about 80% up as US markets opened.
GameStop shares had already gained 74% on Monday after Keith Gill, better known by his internet alias “Roaring Kitty”, reappeared online over the weekend after a three-year hiatus.
Mr Gill posted an image on X, formally known as Twitter, of a man sitting forward in his chair on Sunday, a meme used by gamers to show things are getting serious, before posting several other videos and pictures throughout Monday and Tuesday.
The posts appeared to reignite the phenomenon of 2021, when retail investors – people who do not work for investment houses or other firms – bought up thousands of GameStop shares.
The rally saw shares of GameStop rise more than 1,000% in 2021.
Other meme stocks also benefited, including the struggling cinema chain AMC Entertainment which jumped 2,300% in a short span of time the same year.
The rally was in defiance of several Wall Street hedge funds and major institutional investors, which had shorted the stock amid GameStop’s financial struggles at the time.
Investors short stocks when they believe a company’s share price is likely to fall, borrowing the stock and selling the shares, with the intention of buying them back at a lower price to make profit.
The hedge funds’ short positions meant they thought GameStop’s share price would continue to tumble.
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Instead, the sharp rise led to big losses for several institutional investors, but helped lift GameStop stock.
Mr Gill was at the centre of that retail-driven rally, posting repeatedly to encourage people to buy the stock.
He later appeared in front of the US Congress when the House Financial Services Committee carried out a probe into market manipulation.
The event inspired the 2023 movie Dumb Money, which starred Paul Dano and Seth Rogen.
And the UK’s Financial Conduct Authority launched an advertising campaign warning of the drawbacks of investing in volatile stocks like GameStop for retail investors.
Mr Gill’s return this week has sent GameStop shares up more than 200% in less than two days, prompting speculation among analysts that a new meme stock craze could be here.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The surge has nothing to do with a turnaround in the company’s fortunes and everything to do with the renaissance of the FOMO (fear of missing out) sentiment that saw the stock price of the video game retailer inexplicably spike, despite the company’s fundamentals painting a bleak picture.
“Time will tell whether the latest uptick in GameStop’s stock price becomes the latest in a string of flash-in-the-pan moments the firm has experienced over the years.”
GameStop shares were up more than 240% for the past five days on Tuesday afternoon.
AMC Entertainment shares were also up more than 200% over the same time period, following the post by Mr Gill.
Neil Wilson, chief market analyst at Finalto, said on Tuesday afternoon that the meme stock resurgence “shows no signs of cooling down”.
“This is wild; I didn’t think we’d see this again but retail clients are buzzing,” he said.
