Shares of GameStop, the struggling video game retailer at the center of 2021’s meme stock frenzy, are soaring again following the resurgence of “Rolling Kitty.”
Roaring Kitty, legally known as Keith Gill, posted on social media this week for the first time in nearly four years, sparking another jump in the stock price. His return sparked renewed interest in GameStop stock, the stock that brought Gill to fame and fortune, and other stocks favored by an online community of amateur traders.
So who is Roaring Kitty and why is his return causing ripples in the stock market?
From investment advisor to internet legend
Gil was born and raised in Brockton, Massachusetts and graduated from Stonehill College. He was a Chartered Financial Analyst (CFA) for several years and worked for various financial companies before joining MassMutual, an insurance and retirement savings company.
However, Gill rose to fame through his after-hours presence on social media. Gill, known as The Roaring Kitty on YouTube and “deepf—ingvalue” on the Reddit subforum r/WallStreetBets, has exploded amid the coronavirus pandemic shutdowns and economic stimulus, growing rapidly. He is an amateur and has become famous among his community of traders online.
Mr. Gill launched an offer in 2019 to buy GameStop stock, which at the time was worth just $1. Like many retailers, GameStop saw sales plummet as e-commerce replaced shopping malls and gamers flocked to online downloads rather than physical media.
Still, Mr. Gill saw an opportunity to shock the world and the billionaire hedge fund owners who had bet heavily on the stock. As the COVID-19 pandemic upends American life and interest in stock trading soars, more amateur traders have taken note of Gill’s GameStop lawsuit.
GameStop’s stock price soared from about $1 at the beginning of 2020 to $5 by the end of 2020, and to a high of more than $80 in late January 2021. Mr. Gill, who bought thousands of shares at rock-bottom prices, would end up making millions as an amateur trader waged war against short sellers.
Short squeeze structure
For many of Gill’s followers, the appeal of investing in GameStop went far beyond love and nostalgia. Amateur traders flocked to GameStop and other companies shorted by hedge funds, investing to profit as those companies’ stocks slumped.
GameStop investors had planned to reverse those bets by driving the stock price high enough to force investors who shorted the company into huge losses. Investors who shorted the company lost money on their bets and were forced to continue buying GameStop shares at higher prices to satisfy their bets, pushing the price even higher.
The strategy, known as a short squeeze, cost hedge fund Melvin Capital billions of dollars in losses and required bailout funds from other large hedge funds to keep the hedge fund afloat.
return
The GameStop short squeeze fizzled out in February 2021 after inviting a wave of backlash from Wall Street and Washington, with Gill and several other key figures in the episode testifying before a House committee. It reached its climax.
Mr. Gill went silent immediately after his House testimony, and GameStop stock fell steadily, experiencing a brief spike in excitement before continuing its downward trend.
GameStop stock appeared to be gaining momentum last week even before Mr. Gill’s return, rising from about $11 on May 1 to $17.46 last Friday. GameStop stock was trading at just over $44 just before market close on Tuesday, up 176% over the past five days.
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