Wall Street is feeling meme stock déjà vu.
An army of small investors this week have been driving up the price of GameStop, the video game retailer whose enormous 2021 rally led to fame for the stock’s chief social-media savvy booster (Keith Gill, known as Roaring Kitty), a Netflix series and a movie, a congressional hearing, an investigation by securities regulators — and steep losses for those who mistimed the stock’s rapid rise and fall.
GameStop’s stock was up well over 100 percent in premarket trading on Tuesday, after it gained more than 70 percent on Monday, adding billions in market value. The shares of the movie theater chain AMC Entertainment were similarly buoyant, and obscure cryptocurrencies named after Roaring Kitty and GameStop posted huge gains.
Retail traders have been spurred on by the return of Roaring Kitty to social media after a three-year hiatus. Mr. Gill posted a cryptic series of video clips from movies, television shows and music videos late into the night on Monday on his X account. He made no mention of GameStop, the company he enthusiastically promoted online, making him the face of the meme stock phenomenon in 2021 and 2022, when the shares of beaten-down stocks like GameStop and AMC suddenly jumped 1,000 percent or more.
In recent days, investors have loaded up on GameStop “call” options — essentially, bets that the stock will continue to rise — according to Steve Sosnick, chief strategist at Interactive Brokers. Aside from Roaring Kitty’s return to social media, the rally was not driven by any evident news about GameStop or AMC. “Given my past experience in analyzing the periodic bouts of meme stock activity, consider me suspicious,” Sosnick wrote in a research note.
The sharp upturn has saddled short sellers, who bet on stock prices falling, with huge losses. GameStop shorts started the week with $392 million in profits so far this year. By the close on Monday, that had turned into $852 million in losses, said Ihor Dusaniwsky, managing director of S3 Partners, a data firm.
“Short sellers may be in for a bumpy and bloody ride,” he added.
According to Bloomberg, there are only two Wall Street analysts who cover GameStop, and their ratings are a “sell” and an “underperform.” The retailer has recently laid off staff and a stream of executives have left. Sales have been slumping, with annual revenue falling in four of the past five years.
