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Once again, Wall Street experiences déjà vu as meme stock madness resurges. Smaller investors have started to shoot up the price of GameStop this week, who saw a gigantic uplift in 2021 which brought attention to the stock’s leading promoter on social media, Keith Gill, also known as Roaring Kitty. This led to a Netflix series, a movie, a congress session, an investigation by securities regulators and major losses for investors who miscalculated the stock’s volatile movements.
GameStop’s stock soared by over 60% on Tuesday, following a more than 70% jump on Monday. This added billions to its market value. Likewise, the AMC Entertainment theatre chain’s stock saw similar lift off, alongside obscure cryptocurrencies named after GameStop and Roaring Kitty.
The return of Roaring Kitty on social media after a 3-year gap has encouraged these retail traders. Gill recently released a series of vague snippets from movies, TV shows and music videos on Monday, without mentioning GameStop. His enthusiastic promotion of the company online in 2021 and 2022 made him the face of the meme stock surge.
Recently, investors have been heavily buying up GameStop call options – effectively wagering the stock will keep rising. Steve Sosnick, Chief Strategist at Interactive Brokers, noted there was no clear news driving the rally about GameStop or AMC, causing suspicion about the sudden meme stock activity.
This swift upturn has caused short sellers, who gamble on stock prices declining, to suffer significant losses. GameStop shorts begun the week with $392 million in profits for the year, but by Monday’s end, this converted into $852 million of losses, according to Ihor Dusaniwsky, Managing Director of S3 Partners.
Bloomberg reports that only two Wall Street analysts cover GameStop with both of them rating it as “sell” or “underperform”. Recently, with a number of executives exiting and staff layoffs, the company’s sales have dwindled, with annual revenue declining in four out of the last five years.
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