GameStop’s stock price experienced a significant surge on Thursday, following a cryptic social media post by Keith Gill, the influential figure behind the 2021 meme stock frenzy. Gill, known online as “Roaring Kitty” and “DeepF***ingValue,” shared an image resembling a 2006 Time magazine cover featuring a computer screen, igniting speculation among investors and triggering a rally in GameStop shares.
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The Return of the “Reddit Rally” Catalyst
Gill’s post sent GameStop shares as high as $30.87 before closing with a 6% gain. This echoes the events of January 2021, where Gill’s bullish stance on GameStop fueled a massive surge in the company’s stock price, resulting in a 1,600% increase and significant losses for hedge funds that had bet against the retailer. This phenomenon, dubbed the “Reddit rally,” highlighted the power of retail investors and online communities in influencing market dynamics.
Steve Sosnick, chief strategist at Interactive Brokers, observed a recurring pattern in GameStop’s trading activity. He noted that after periods of relative stability or decline, a social media post from Gill often precedes a price rally. This recent surge follows a similar trajectory, with the stock recovering from $21 in early November to around $30 near Thanksgiving, before retracing some of those gains.
Options Trading Activity and Implied Volatility Surge
The renewed interest in GameStop also led to a significant increase in options trading activity. Approximately 300,000 GameStop options contracts changed hands by 2:14 p.m. (1914 GMT) on Thursday, exceeding the average trading volume by 1.5 times, according to data from Trade Alert. Furthermore, the stock’s 30-day implied volatility, a measure of expected price fluctuations, jumped to a three-week high of 132%, up from 93% in the previous session. Contracts betting on GameStop’s price exceeding $30 by Friday were particularly active.
Renewed Enthusiasm and “Animal Spirits” in the Market
Gill’s return to social media after a three-year hiatus has reignited excitement among his followers, many of whom view him as a symbol of individual investors challenging Wall Street institutions. Art Hogan, market strategist at B. Riley Wealth Management, suggests that the resurgence of meme stock popularity often coincides with periods of increased market enthusiasm and “animal spirits.” He notes that speculative trading in these stocks tends to increase when markets approach or reach all-time highs.
The Ripple Effect on Other Meme Stocks
The impact of Gill’s post extended beyond GameStop, influencing other meme stocks that gained prominence during the 2021 rally. Shares of Unity Software closed 5% higher, while AMC Entertainment, another favorite among retail investors, saw a 6% increase. The 2021 meme stock frenzy, sparked by Gill’s posts on the WallStreetBets subreddit, resulted in substantial losses for hedge funds and attracted regulatory scrutiny. The events even inspired the 2023 movie “Dumb Money,” directed by Craig Gillespie.
Crypto’s Impact on GameStop’s Appeal
Steve Sosnick also pointed out that the rise of cryptocurrencies might have diverted some attention from GameStop. While GameStop’s stock has risen approximately 76% this year, Bitcoin has surged over 130%, exceeding $100,000 on Thursday amidst growing optimism about regulatory developments. This remarkable rally in the world’s largest cryptocurrency could be drawing speculative investors away from meme stocks like GameStop.
Conclusion: A Reminder of the Power of Social Media in Financial Markets
The renewed interest in GameStop following Keith Gill’s cryptic post underscores the significant influence of social media and individual investors on market dynamics. While the long-term impact of this latest surge remains to be seen, it serves as a reminder of the potential for rapid price movements and heightened volatility in the meme stock landscape. Investors should proceed with caution and conduct thorough research before making any investment decisions in this volatile market segment.
