Source: Golden Ten Data
“Legend Cow Sang” posted its first tweet in three years, which immediately sparked a trading frenzy.
$GameStop (GME.US)$The sharp rise in stock prices on Monday attracted attention due to speculation that legendary retail owner Keith Gill (Keith Gill) will return to social media. He drove a meme stock frenzy in 2021 under the name “Roaring Kitty” (Roaring Kitty).
Jill's account has been dormant for a long time. In 2021, he$Reddit (RDDT.US)$Day traders were summoned to try to squeeze GameStop's short sellers, thus becoming famous. The account's post on X on Monday showed a man leaning forward and holding something that looked like a gamepad in his hand, which some traders thought meant Jill would start moving again. The post attracted over 12 million views within a few hours. At 11 a.m. New York time on Monday, Jill once again posted a short video on X, and this time he said, “OK, I'll do it myself.”
The reaction to Jill's initial post was overshadowed by 2021 fanaticism, and discussions on Reddit's WallStreetBets and StockTwits sparked a rush of purchases from retail traders. GameStop traded more than 175 million shares on Monday, almost 30 times the average annual volume. Within 90 minutes of opening, it stopped trading nine times due to fluctuations. GameStop shares rose by up to 119 percent on Monday, closing at $30.45, up 74 percent.
Peter Atwater (Peter Atwater), president of Financial Insights (Financial Insights) and an adjunct professor at William & Mary (William & Mary) and the University of Delaware, said, “His ability to attract a group of people shows that this group of people has regained the feeling of FOMO (fear of missing out) and YOLO (you only live once). When people are invested in something with pure speculative value, their confidence is very high, which is a way of showing.”
GameStop surged for three consecutive weeks prior to Monday's sharp rise. By the close of last Friday, the stock price had soared 68%. This is also GameStop's longest continuous rise since this year. In January 2021, the company's stock price soared more than 2000%, bringing the meme stock frenzy into the wider public eye. After adjusting for the stock split, the stock peaked at $86.88 at the end of the month and then plummeted by about 88% in three weeks. The stock's share price has fallen by nearly three-quarters since January 2021, when the so-called “Reddit Raiders” flocked to the highest point. To recover all losses, the stock price must increase more than four times from Monday's level.
Notably, according to data from financial analysis firm S3 Partners, the share of shorted shares available for trading has remained around 24%. That's already high for an average company, but it's still far from what it was before the 2021 frenzy (when around 140% of available shares were shorted). In the first round of surges three years ago, GameStop surged more than 1000% in a few days as retail traders pitted against Wall Street bosses who shorted the stock on Reddit's Wall Street Bets forum.
The “Reddit Raiders” once had plenty of time and cash due to stimulus policies and work policies during the pandemic, but now most people have returned to work and are burdened by higher interest rates. Some got involved in the frenzy of the time very late, and they are still losing money even though the stock price has soared recently. Professional shorters have also largely abandoned attacks on companies with relatively small stock circulation because they fear that the power of social media will incite a squeeze.
With no clear catalyst driving recent gains, GameStop's volatility has once again caused retail investors to become the main force in demand. According to Giacomo Pierantoni, head of data at Vanda Research, the total capital inflow last week reached 12 million US dollars. Pierantoni added: “This surge in retail activity acted as a reverse signal, prompting institutional investors to quickly short the stock after these rebounds driven by retail investors.”
According to data compiled by foreign media, most people on Wall Street have avoided analyzing this stock in recent years. Only three analysts have analyzed the stock. Of these, 2 have recommended that customers sell it, only 1 gave a holding rating, and none recommended buying the stock. Analysts have long warned that GameStop's market capitalization of $9.3 billion has moved away from its basic value. The company's net revenue for 2023 was just $6.7 million, which meant that its price-earnings ratio was over 1,000 times. As a reference, the darling of the market$NVIDIA (NVDA.US)$The price-earnings ratio is approximately 74 times.
Wedbush's Michael Pachter, one of GameStop's most skeptics, said, “I don't think they have enough data to maintain this situation, and I don't think they have the determination Gabe Plotkin showed three years ago, so this situation is likely to disappear as fundamentals continue to deteriorate. ” Gabe Plotkin, fund manager of hedge fund Melvin Capital, lost a lot of money back then due to shorting GameStop.
GameStop's options activity has increased dramatically so far this month, but it's far from the level of 2021. The number of open positions for call options reached 5,88,205, the highest since this year. The volume of call options traded last Friday was 293,402, almost three times the 20-day average. About 700,000 contracts changed hands on Monday, more than four times the average of the past month. However, at the peak of the meme share craze in 2021, millions of contracts were traded during a single trading session. On the most active day of the year, 8.5 million contracts changed hands on January 22nd.
GameStop's stock price has dropped more than 60% since its peak in 2021. Another stock favored by retail investors$AMC Entertainment (AMC.US)$It's down more than 99%. The 2021 meme stock frenzy disrupted the US stock market and taught some Wall Street professionals a lesson, but after the 2022 bear market, this frenzy did not end well. According to data compiled by J.P. Morgan Chase in 2022, YOLO people lost all of the money they earned during the meme stock boom.
Although this group's Monday event has brought back memories of 2021, it hasn't reached that level. According to Bloomberg Intelligence (Bloomberg Intelligence) estimates, retail traders' stock and ETF trading orders accounted for 24% of the total market volume in the first quarter of 2021, compared to slightly more than 17% in the first quarter of 2024.
editor/tolk