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GameStop’s shares soared 21% on Monday after prominent meme-stock trader Keith Gill suggested that he owns a large stake in the company that may be worth millions on paper. Gill, known online as Roaring Kitty, famously changed the fate of the once-foundering video game retailer during the pandemic-era meme-stock craze, inspiring a movie called Dumb Money.
Regulators are looking into whether the posts made from an account tied to Gill break any market-manipulation rules as other meme stocks, including movie theater chain AMC, enjoy rallies catalyzed by Gill’s unexpected return.
SIGNALS
Cashing in could be tricky for Roaring Kitty
It would be difficult for Gill to sell even a portion of his options without drawing so much attention that it could knock down their price, market analysts said. “It’s going to be challenging to monetize this without moving the market just because everybody’s hyper aware of this now,” Garrett DeSimone, head of quantitative research at OptionMetrics, told Reuters. Gill could avoid losses by shorting 12 million shares of GameStop before the options expire, options traders said.
GameStop frenzy shows signs of worrisome market trends
“The speculative juices over the last several weeks are certainly there,” an investment banking executive told Bloomberg, but expressed skepticism that the frenzy will last. Other Wall Street analysts echoed that concern, warning that getting swept up in a new meme-stock moment comes with the risk of major losses. The 2021 meme stocks rise came at a peculiar moment for the markets, a senior markets columnist wrote in The Wall Street Journal, and investors should be wary of trying to “outwit the crowd” again this time around.
Roaring Kitty stokes market manipulation concerns
This latest surge in GameStop was driven by a screenshot posted to the Roaring Kitty account with E*Trade, which is now considering kicking Gill off the platform over concerns that he could be manipulating the market for his own benefit. The platform, which is owned by Morgan Stanley, is discussing whether Gill’s post amounted to manipulation — and whether the firm is willing to risk “drawing the attention of his meme army by removing him,” the Wall Street Journal reported, potentially alienating customers. The Massachusetts securities division is also looking into the legality of Gill’s activities, the Journal reported.