If ever there were evidence that the market had come full circle and returned to 2020-style meme stock hyperbole, the spike in Gamestop shares this past week was all the proof you needed.
Gamestop share price soared to almost $70 on the back of news that a single Twitter account, Roaring Kitty, had posted for the first time in years.
For those not familiar, Roaring Kitty is the pseudonym of Keith Gill. He’s famous for his role in creating the Gamestop frenzy back in early 2021. At Gamestop’s height, Gill’s holding was estimated to be worth $48 million, an enormous sum given that he had invested merely a few tens of thousands.
What is interesting about the furore is that Gill originally had a fundamental investment thesis, rooted in deep value. In fact, his videos were posted under the pseudonym Roaring Kitty on YouTube and DeepF***ingValue (DFV) on Reddit. Like Michael Burry, his view was that Gamestop was massively undervalued and ripe for a turnaround.
As the dominos fell, something interesting happened though.
Attention Driven Price Action
From a fundamental thesis akin to the type Warren Buffett may rely on to build a case for Gamestop, an evolution occurred where retail traders gravitated to his thorough analysis as well as his engaging style and transparency.
Soon it became clear that Gamestop was the subject of massive short-selling by large hedge funds. And Gamestop share price took on a life of its own as retail traders collectively started to buy en masse as a way to “stick it to the man” driving massive paper losses for the funds.
As the losses grew so were the funds forced to buy back their borrowed holdings and soon a short squeeze took effect.
The covering by shorts fueled higher prices and a virtuous cycle kicked into gear where, fueled by enthusiasm and buying activity of retail traders, Gamestop shares went higher. As hedge funds were forced to buy back borrowed shares, GME share price went “to the moon” as the kids on the forums like to say.
Adding fuel to the already burning fire was the concept of being “diamond-handed” meaning, among retail traders a philosophy spread to “hold on no matter what” the volatility in the underlying share price. With few selling and most holding or buying, Gamestop share price continued to soar.
And as it did so, public attention and media coverage grew, which led to ever more eyeballs on Gamestop, drawing in ever more retail traders who bought and further fueled higher price action.
The massive public support for Roaring Kitty and the movements of Gamestop led the government to intervene. In February 2021, Gill testified before the U.S. House Committee on Financial Services. Faced with the wrath of government, he remained calm under fire and further elevated his status as a cult hero in trading circles.
His story exemplified the power of social media in catalyzing the rise of a single figure from obscurity to fame in just a few months, and sparked conversations about the role of market manipulation and democratized investing.
By the time the storm ended, Gill’s fortune had risen to the tens of millions of dollars from a $53,000 original investment. Then, he went dark. No posts, no words, nothing at all from Gill, until this past week.
His return to social media led many to speculate that his focus would once again be on Gamestop, causing the share price to soar.
What’s Next for Roaring Kitty?
When Roaring Kitty posted for the first time in years, the retail public were giddy with excitement and tried to front run anticipated tweets by him that would once again send Gamestop shares soaring.
However, a series of video-memes have instead been posted regularly by him that have largely confused followers. It’s simply not clear what his strategy is, so any Gamestop buyers now may find themselves in for a big disappointment.
If he mentions another ticker symbol, though, you can be sure that his legions of followers will be scrambling to their keyboards as fast as possible to see what his new focus is.
Speculation is rife that the top short candidates are prime targets, meaning one of the stocks below is likely to fly to the moon if he points his canons in their direction.
Somewhere in these video memes may lie the answer and if you can puzzle it out before the rest of the world, there is probably a big win, if temporary, to be made.
— Roaring Kitty (@TheRoaringKitty) May 15, 2024
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