The stock market influencer responsible for the meme stock frenzy of 2021 has caused a significant increase in the value of GameStop shares, the struggling US videogame retailer. Keith Gill, who is known as Roaring Kitty in online circles, disclosed his $116m (£90.8m) investment in GameStop on Sunday. Gill informed his followers that he holds 1.8% of the company’s available stock, equivalent to five million shares, as well as call options that give him the right to purchase more shares later this month.
In a recent return to his Reddit account, after a three-year hiatus, Gill was credited for reigniting the surge in demand for GameStop and other undervalued stocks. This resulted in GameStop’s market value doubling in just three weeks. The company’s board of directors took advantage of this renewed interest by raising over $900m through a subsequent stock sale. As a result, GameStop shares saw an increase of $4.6bn in market value, with a 75% surge in early Monday trading. However, the shares eventually settled at a 30% increase.
According to LSEG data, GameStop shares saw more trading activity in the first 42 minutes of official trading than Apple’s shares. They were priced at £30 per share, following Friday’s closing price of $23. Gill’s GameStop trades sparked the demand for meme stocks in 2021, causing significant losses for hedge funds as investors gravitated towards stocks with weak fundamentals, such as GameStop and cinema chain AMC. These stocks gained a cult-like following through Reddit and other online platforms. However, the rallies eventually dissipated as regulators and politicians raised concerns about the activity, and the companies’ performance failed to match their inflated valuations.
In the case of GameStop, its core numbers continue to be impacted by the challenges of transitioning to online gaming. The company’s primary business remains the sale of new and used videogame discs. In a recent warning, GameStop reported a decrease in first quarter net sales compared to the same period last year. Nigel Green, chief executive of the asset management and advisory firm deVere Group, cautioned investors to approach the renewed interest in GameStop with caution. He added, “These headline-grabbing figures may attract another wave of interest and capital, resulting in a significant increase in the stock’s value. It would not be surprising if GameStop’s market value increased by $100bn by the end of Monday due to this frenzy.”