What’s happening to Gamestop shares and who is ‘Roaring Kitty’?
Roaring Kitty, the protagonist in the so-called “meme stock craze” of 2020/2021, didn’t even need to say anything to prompt rallies in Gamestop shares and AMC that sent both through the roof almost instantaneously.
Few stockpickers in the world have the power and influence to be able to double a company’s market valuation in the space of two days. Next to none could trigger such a vast move with just a single comment.
In just one day’s trading on Monday (May 13th), shares in Gamestop – the S&P midcap video game selling subject of the 2021 craze – were up over 74 per cent and cinema chain AMC surged 78 per cent, not thanks to any actual advice on the company’s fundamentals from Mr Kitty. Rather, the enormous rallies were down to him posting a simple meme of a man leaning forward in his chair.
The tweet (pictured below), which now has over 131,000 ‘likes’ at the time of publication, followed a three-year silence from the user – real name Keith Gill, which sent Wall St and the online investment community into a frenzy.
Monday’s rally was followed by major gains on Tuesday and Wednesday, prompting Hargreaves Lansdown’s head of equities, Susannah Streeter, to warn investors hoping to hitch a ride on the wave to “exercise extreme caution”.
But who is the man behind the flippant market-moving social media channels, and what is behind the latest rally that he’s caused?
Who is Roaring Kitty, aka Keith Gill?
Keith Gill, also known as Roaring Kitty on Youtube and Twitter/X and, regrettably, DeepF*ckingValue (DFV) on the social media channel Reddit, is a 37-year-old retail investor and online financial analyst from Massachusetts.
The investor is best known for his involvement in the aforementioned Gamestop, also known as GME, a saga, which wound up in him having to give evidence to US Congress and even becoming the subject of a Hollywood film.
But the bandana-toting Gill had been using social media to profile his investment journey years prior to his position in Gamestop shares, which made him a global sensation. He joined Twitter as early as 2014 – as he put it in his bio at the time – to document “hunting stocks and pouncing on investment opportunities”.
Meanwhile, his YouTube channel, which is dominated by jovial videos in which Gill takes viewers through his investment thinking, dates back to 2015. However, his first video was only posted in 2020.
It wasn’t until the blogger started using Reddit, however, that his videos and posts, which, rather than focussing on the ‘hot’ day trading advice that had come to characterise modern retail investing, contained on longer-term value investing, started to gain widespread attention.
A regular poster on a ‘subreddit’, which is, for all intents and purposes, a channel on a certain subject that users follow or engage with – called r/wallstreetbets, was and is devoted to stock tips and finance commentary.
Gill maintains – as he did in his Congress hearing – that he posts online for “educational purposes” and not to advise people what to do nor as a means by which to – illegally – pump up a stock which he already holds.
He has drawn staunch criticism from finance veterans, disapproving of the extent to which Gill’s social media activity manipulated the market.
Others hold him up as an oracle of modern finance whose use of the retail investing app Robin Hood to squeeze institutional hedge fund managers drew comparisons to the original Sherwood Forest roaming archer after whom the app was named.
What is behind this week’s “meme stock” revival?
Other than a series of – admittedly very funny – tweets, Gill has posted that parody films like Braveheart and Ferris Bueller’s Day Off and cheerlead his own return.
Unlike the Gamestop short squeeze of three years ago, where Gill laid out over a series of YouTube live streams and Reddit posts the investment case for Gamestop shares, this time round Mr Kitty has posted next to no coherent or cogent rationale for an investment.
This round appears to be pure ‘vibes-based’ speculation with next to no substance or pretence of an investment case. However, the approach being taken by the army of retail investors trading in response to Gill’s posts appears to be much the same as meme stocks’ 2021 heyday – so what was that approach?
What happened to Gamestop shares in the “short squeeze” of 2020/2021?
The Gamestop short squeeze of 2020/2021 was made possible by three main things. First, the pandemic and the monetary stimulus that central banks and governments put in place to keep the economy afloat led to ordinary people having much more savings than they otherwise would.
Second, the proliferation of low-cost, intuitive trading platforms like the aforementioned Robinhood and eToro broke down barriers to levels of investing that had previously had a much higher barrier to entry.
And finally, the large followings on social media channels like r/WallStreetBets meant that previously disparate and amorphous retail investors worked out that if they moved as one, their volume could start to move markets.
Gill focussed his posts on undervalued stocks on which several high-profile hedge fund managers like Melvin Capital had taken up a short position. Gill saw this as unfair on the small retail investor and incited a major reaction online where users “squeezed” the legacy hedge fund’s short positions, by pushing up the stock.
The move caused bedlam in the finance world, costing some funds billions which was aggravated by the fact that when exiting from their position, short-sellers had to buy back more of the stock that was rallying, further pushing up the price.
White Square Capital, a British hedge fund that was heavily shorting Gamestop at the onset of the rally, was forced to close down on account of the losses it shipped during the manic period.