GameStop, AMC Stocks Soar as 'Roaring Kitty' Returns, Sparking Meme Stock Frenzy

Shares of retail investor favorites GameStop and AMC Entertainment surged on Tuesday, fueled by social media posts from Keith Gill, also known as "Roaring Kitty," the key figure behind the 2021 meme stock phenomenon.

GameStop's stock closed up 60% at $48.75, its highest since June 2021, while AMC finished up nearly 32% at $6.85. This rally was triggered by Gill's return to social media platform X, where he shared a meme and over 10 movie clips, including from "X-Men Origins: Wolverine" and "The Avengers," without directly mentioning the companies. Despite this, GameStop and AMC became the most traded stocks by retail investors on Monday and Tuesday, according to J.P. Morgan data.

Gill's resurgence marks his first social media activity in nearly three years. He is widely credited with initiating the January 2021 Reddit rally that saw retail investors coordinating on platforms like Reddit to push up the prices of heavily shorted stocks.

"The fact that Roaring Kitty is back should be totally meaningless to the stock market, but the fact that it isn't is fascinating," commented Matthew Tuttle, CEO of Tuttle Capital Management.

Market Impact

GameStop's shares have nearly tripled in value since Friday's close, boosting its market capitalization to around $18 billion. On Tuesday alone, short sellers faced $1.6 billion in paper losses, bringing their combined losses since Monday to $2.4 billion, as reported by analytics firm Ortex Technologies. Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, suggested that these losses might force short sellers to cover their positions, potentially driving GameStop's stock price even higher.

AMC also benefited from the frenzy, completing a $250 million "at-the-market" share sale program on Monday, as its stock surged 78% to $5.19. This is more than double its record low from mid-April.

Broader Market Effects

The surge extended beyond GameStop and AMC. Headphone maker Koss saw a 40% jump, BlackBerry's U.S.-listed shares rose 12%, and food storage container company Tupperware gained 17%. Even Reddit, a platform used by retail investors to coordinate stock buys in 2021, added 7%. Retail-focused brokerage Robinhood gained nearly 7%.

"This is ridiculous but all a part of free markets," said Andrew Left of Citron Research, a former GameStop short seller.

Speculation vs. Economic Reality

Some analysts caution that the speculative trades of this meme rally may not last long given the current economic conditions. Interest rates are significantly higher than during the era of cheap money in 2021. Ben Laidler, global markets strategist at digital brokerage eToro, remarked, "This meme rally maybe rhymes with 2021 but is unlikely a repeat."

About 600,000 GameStop options contracts were traded on Monday, significantly lower than the one million to two million contracts traded daily in early 2021. However, the implied volatility of GameStop options surged to levels comparable to 2021, indicating rapid market maker reactions to potential repeat scenarios.

Institutional investors are now better prepared to handle such situations, having learned from the significant losses they incurred three years ago. In the past five sessions, retail traders' share of total GameStop turnover averaged around 7%, and about 10% for AMC, according to Marco Iachini, senior vice president at Vanda Research. This suggests substantial participation from institutional investors alongside retail traders.