GameStop (NYSE:GME) witnessed a dramatic surge on Monday, driven by a revelation from Reddit user “DeepF***ingValue,” believed to be individual investor Keith Gill, famously known as “Roaring Kitty,” who played a pivotal role in igniting the meme stock frenzy in 2021. Late Sunday, the user posted a screenshot on Reddit’s Superstonk subreddit, purportedly showcasing a nearly $175 million investment in the video game retailer.
The screenshot displayed holdings of 5 million GameStop shares acquired at an average price of $21.274, valued at $115.7 million based on Friday’s closing price. Additionally, the account appeared to own 120,000 options contracts expiring on June 21, granting the right to purchase GameStop shares at $20 each, valued at $65.7 million as of Friday’s close.
Following this revelation, GameStop stock surged by as much as 75% at the market open, doubling during premarket trading. By 10 a.m. ET, the stock had risen approximately 35%, reaching $38 before temporary volatility halts were imposed.
Steve Sosnick, Interactive Brokers chief strategist, cautioned investors against chasing the rally, emphasizing the importance of assessing whose interests are being served. He warned that investors chasing the stock surge could unwittingly provide liquidity for those controlling the account to sell into their enthusiasm.
This surge comes after GameStop experienced a 180% rally over two days in mid-May, following “Roaring Kitty’s” first post on X, formerly known as Twitter, since 2021. Although last month’s rally was short-lived, GameStop seized the opportunity, raising approximately $930 million through the sale of 45 million shares, causing a 25% surge in its stock price.
Traditionally, investors anticipate a decline in the stock price of a company issuing new shares, as they dilute the value of existing holdings. However, GameStop defied this expectation, capitalizing on the momentum generated by the meme frenzy. Similarly, AMC (NYSE:AMC) leveraged the meme hype, raising $250 million through the sale of 72.5 million shares last month, leading to a 10% increase in AMC shares on Monday.
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