Shares of GameStop, the video game retailer at the center of 2021’s meme stock frenzy, are rising again following the return of “Roaring Kitty.”
Roaring Kitty, legally known as Keith Gill, kicked off another stock market rally this week with his first social media post in nearly four years. His return sparked a new wave of interest in shares of GameStop, the stock that launched Gill to fame and fortune, along with other stocks favored by an online community of amateur traders.
So who is Roaring Kitty and why is her comeback shaking up the stock market?
Investment advisor turned internet legend
Gill 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 several financial companies before joining MassMutual, an insurance and retirement savings company.
Gill rose to fame, however, through her after-hours social media presence. Known as The Roaring Kitty on YouTube and “deepf—ingvalue” on the Reddit subforum r/WallStreetBets, Gill has become prominent among a fast-growing online community of amateur traders that has exploded amid the US shutdowns and stimulus checks. COVID-19 pandemic.
Gill, in 2019, began advocating buying GameStop shares, which were then worth just $1. Like many retailers, GameStop saw its sales plummet as e-commerce supplanted shopping malls and gamers flocked to online downloads. -line on physical media.
Still, Gill saw an opportunity to shock the world — and the billionaire hedge fund owners who had placed big bets against the stock. As the COVID-19 pandemic upended American life and sparked a surge in interest in stock trading, more and more amateur traders took up Gill’s case for GameStop.
GameStop shares jumped from about $1 at the start of 2020 to $5 at the end of the year, and then soared to a peak of more than $80 in late January 2021. Gill, who bought thousands of shares at its lowest level it would make millions as amateur traders waged war against short sellers.
Anatomy of a Short Grip
The appeal of investing in GameStop was much more than affection or nostalgia for many of Gill’s followers. Amateur traders flocked to GameStop and other companies that hedge funds had “sold short,” making investments that would pay off as those companies’ shares faltered.
GameStop investors had a plan to turn those bets upside down, driving up the stock price enough to force steep losses on those who had shorted the company. As investors who shorted the company lost money on their bets, they were also forced to continue buying GameStop shares at higher prices to fulfill those bets, driving the price even higher.
This strategy, known as a short squeeze, resulted in billions of dollars in losses for hedge fund Melvin Capital, which sought rescue financing from other large hedge funds to stay afloat.
The comeback
The GameStop short squeeze failed in February 2021 after generating a wave of backlash from Wall Street and Washington, culminating in Gill and several other key figures from the episode testifying before a House committee.
Gill fell silent shortly after his House testimony, and GameStop shares fell steadily, experiencing brief spikes of excitement before continuing their downward trend.
GameStop shares appeared to be gaining momentum last week, even before Gill’s return, rising from about $11 on May 1 to $17.46 last Friday. GameStop shares were trading at just over $44 just before the market closed on Tuesday, a 176% increase over the past five days.
This story originally appeared on thehill.com read the full story
