Why GameStop’s meme mania isn’t catching on  

By some measures, the return of the trader known by the nickname RoaringKitty to the investing fray has had an impact.

Since he started posting on social media after a three-year hiatus, Keith Gill has helped trigger a surge in the share price of GameStop, the video games retailer at the centre of the “meme stock” craze of 2021.

Many of his followers had hoped though that Gill might bring about a broader revival of that mania. His earlier social media posts were a key catalyst in helping to propel the struggling GameStop into the vortex of a day-trader frenzy where normal valuation concepts were thrown out of the window. The stock climbed some 2,000 per cent in early 2021 with retail investors piling into GameStop and other well-known names with struggling businesses before it all came crashing down.

This time around, though, the drama has been a more limited affair. In five weeks since his first cryptic post on X showing an illustration of a man leaning forward on a chair, GameStop’s share price has risen by more than half, although it more than doubled at one point. That has enabled the company to raise $3bn selling new shares and the newly strengthened balance sheet of the company prompted prominent short seller Andrew Left of Citron Research to drop his bets against GameStop this week. The company is now valued at $12.4bn.

But it has all been a far cry from the 2021 mania. “I wouldn’t characterise this as anything close to what we saw in 2021. This time, there was one name and it was GameStop,” said Joe Mazzola, head trading and derivatives strategist at Charles Schwab. Even GameStop made the top 10 most active names for May only among the brokers’ millennial clients.

“People were buying stocks in May but they weren’t levering up like we saw in 2021 — option activity in the overall market was down compared with where it’s been,” Mazzola added. 

There have been some flashes of excitement outside GameStop. Trading volumes initially spiked last month in AMC and BlackBerry — both popular memes in 2021. But the heightened activity lasted just days. While AMC’s shares have certainly gained — they are up 75 per cent since RoaringKitty reappeared — they are not attracting the frenzy they once did. Neither stock registered on Schwab’s May list of the 25 most-traded among its millions of retail clients.

“What we’re seeing here is really just market shenanigans — there are some other pockets of froth out there, too,” said Steve Sosnick, chief market strategist for Interactive Brokers. “You just don’t have those same circumstances from 2021 — zero rates, a bull market and everyone isolated and online because of the pandemic.” 

Higher interest rates have also made speculation using borrowed funds more expensive. Bullish investors still abound — the S&P 500 closed at yet another record high this week — but they have other targets, such as chipmaker Nvidia, which, tellingly, easily beat GameStop to be Interactive’s most-traded stock this week.

“RoaringKitty proved no match for AI mania,” said Sosnick.

Still each development in the latest episode has attracted thousands of comments, jokes and memes on Reddit from luridly named users. “I bought a handful way back and had literally forgot about it,” wrote Reddit user StinkyDogFart this week in response to another reawakened GameStop fan. “Then all the media noise brought me back, now I’m buying more and having more fun than ever.”

On Thursday, so heavy was the online interest in the company’s annual general meeting that the event crashed, forcing a postponement. Later, Gill revealed his GameStop holding had reached just over 9mn shares, worth $262mn, making him the fourth largest shareholder with a 2.3 per cent stake, according to LSEG data.

“At this rate RK [RoaringKitty] is gonna be the one hosting the shareholder meetings on his YouTube channel,” said one Reddit user known as Penguinpoopparty.

Perhaps, though, a big reason why that the GameStop frenzy hasn’t spread is the ambiguity of Gill’s strategy. In a YouTube livestream earlier this month, Gill drank beer and laughed when his appearance coincided with a sharp sell-off in GameStop’s shares. He said he supported GameStop management but gave no specifics.

Back in 2021, Gill presented an investing case based on GameStop’s market potential and its reboot efforts as well as the potential for a “squeeze” on short sellers, forcing them to buy up shares to cover their positions. This time, his mere presence seems to be the main argument for GameStop’s shareholders. So far that’s proved hard to translate into a wider movement.

jennifer.hughes@ft.com