Written by Sruti Shankar and Medha Singh
(Reuters) – GameStop Inc. and AMC Entertainment Inc. are on fire after social media posts by the people behind their “Rolling Kitty” rally, reminiscent of the “meme stock frenzy” that swept Wall Street three years ago. It once again attracted the attention of individual investors.
Here’s what you need to know about the recent surge in meme stocks.
Barking Kitty and his sketch
Keith Gill, widely known among traders as “Roaring Kitty,” shared a series of cryptic posts on social media platform X on Sunday after a three-year hiatus. One of his includes a sketch of a man slouched in a chair. This is a popular meme among gamers to show that things are getting serious.
With colorful YouTube streams and posts on Reddit, Gill took a bullish stance on GameStop in 2021 and helped attract a ton of retail money into the company.
In his 2021 congressional testimony, Gill rejected the idea that he used social media to promote GameStop to unwitting investors and make a profit.
GameStop leads again
Video game retailer GameStop is up more than 139% from Friday’s close to Tuesday afternoon, adding more than $9 billion to its market value. Theater chain AMC Entertainment rose more than 130% after two days of gains. The heavily shorted stock was on track to post its biggest two-day gain since January 2021. Still, both are still well below their 2021 highs.
The pair was also the two most traded stocks by retail investors on Monday, according to JPMorgan.
Retail traders also added to other heavily shorted stocks, including solar power company SunPower, headphone maker Kos Corp. and storage container maker Tupperware Brands, whose prices soared between 24% and 83%.
Retail market orders as a percentage of total market volume increased from 14.1% on May 1 to 17.5% on May 13, according to JPMorgan data.
What are meme stocks?
Meme stocks are stocks of certain companies that have increased in value as individual investors used investment advice from trading platforms and social media.
It came to the fore in 2021, when coronavirus lockdowns boosted savings, policy stimulus put cash in people’s pockets, and ultra-low interest rates drove investors into the stock market.
The spread of zero-commission trading apps has also made it easier for anyone with a smartphone to get into stocks.
Thousands of Reddit users using low-cost trading platforms such as Robinhood banded together to drive up the price of “meme” stocks, squeezing hedge funds that had taken short positions or bet against them. .
How is it different this time?
U.S. interest rates are at multi-decade highs due to the Federal Reserve’s aggressive efforts to curb inflation, and gains in the S&P 500 are concentrated in stocks of a few giant companies.
Many fund managers are also waiting for further commentary from Roaring Kitty.
Round Hill Investments last year put a nail in the coffin for popular pandemic-era trading when it announced it was shutting down its exchange-traded fund (ETF) that tracks the performance of meme stocks, nearly two years after its launch.
(Reporting by Sruthi Shankar and Medha Singh in Bengaluru; Editing by Shriraj Kaluvila)
