GME
AMC
GameStop (NYSE: GME) experienced a meteoric rise of 75% during the pre-market trading on Monday. This unprecedented surge was fueled by Keith Gill, famed for sparking the meme stock craze in 2021, after he revealed a massive $175 million investment in the video game retailer. Gill, who goes by the moniker "Roaring Kitty" on social media platforms, posted a screenshot on Reddit's Superstonk subreddit late Sunday, showcasing his substantial stake.
The screenshot displayed in Gill's post indicated ownership of 5 million shares of GameStop, acquired at an average price of $21.274 each. As of the previous Friday’s closing price of $23.14, this position was valued at approximately $115.7 million. The screenshot also revealed 120,000 options contracts due to expire on June 21, allowing the purchase of GameStop shares at $20 each, adding a position worth about $65.7 million based on the latest closing price.
The market responded swiftly to this announcement, with GameStop shares hitting an early peak of $41. This move follows a pattern, reminiscent of a 180% rally the company saw back in mid-May, when "Roaring Kitty" ended his two-year hiatus on X (formerly Twitter) with a post that reignited retail investor interest. However, market analysts remain cautious, noting that the current meme stock excitement does not match the retail inflows witnessed in 2021.
Despite the surge, analysts warned that GameStop's recent rise could be fleeting. In May, the company took advantage of the rally by issuing 45 million new shares, generating approximately $930 million in proceeds. While such action typically dilutes existing shareholdings and pressures the stock price downward, GameStop’s stock interestingly surged by 25% following the announcement. Steve Sosnick, chief strategist at Interactive Brokers, remarked, “In a typical market environment, such moves can cause unease among investors. Companies usually sell stock when they perceive it to be overvalued.”
AMC Entertainment Holdings (NYSE: AMC) also made the most of the meme stock mania by raising $250 million through the sale of 72.5 million shares last month. Following the trend, AMC’s shares also saw a 25% rise during Monday’s pre-market session.
The resurgence of meme stocks like GameStop and AMC highlights the enduring, albeit unpredictable, influence of social media-driven retail investor movements on market dynamics. While the fervor can lead to short-term gains, investors should remain cautious and keep an eye on the underlying fundamentals.
