GameStop shares surged over 100% in premarket trading on Tuesday following a 74.4% increase at the close of Monday’s session, propelled by a meme-stock rally triggered by Keith Gill’s return to social media.
Known as Roaring Kitty, Gill was a pivotal figure in the 2021 meme stock phenomenon that surrounded the “wallstreetbets” subreddit.
GameStop is widely regarded as the first meme stock, with its price rising as much as 100 times over several months in late 2020 and early 2021 as its Reddit meme community crafted a short squeeze.
The stock saw multiple trading halts on Monday due to significant volatility.
GameStop stock, which trades on the NYSE under the ticker GME, was up over 120% at $68 in premarket hours on Tuesday. At the time of writing — 13:45 GMT on Tuesday — it had shed its earlier gains to trade around the $50 mark (still a gain of over 62%) after market opened.
Another popular meme stock, AMC Entertainment, was also up over 90% in early hours on Tuesday.
As noted by MarketWatch reporter Steve Goldstein, if GameStop manages to sustain the recent gains, particularly those seen in premarket trading on Tuesday, the company’s market capitalization will exceed that of Best Buy, the electronics retailer identified as a competitor in GameStop’s annual report.
At Monday's close, GameStop's market cap stood at $9.3 billion — compared to Best Buy's $16.2 billion.
Goldstein compared the two firms’ underlying financials:
In his morning note on Tuesday, Markets.com Chief Market Analyst Neil Wilson also noted that there was “no fundamental reason” for the sharp rise in GME shares, as “GameStop’s last earnings report was abysmal”:
“Short interest in GME stood at 24% before the fireworks, so we can assume a fair chunk of the move is short-covering action chasing the initial move up, plus some hedgies will have had calls on their shorts.
Trend following and momentum strategies may have helped. And it looks like retail investors are becoming more bullish again and willing to take on more risk. There is no fundamental reason for the move as such — GameStop’s last earnings report was abysmal”.
The meme-stock rally that sent GameStop stock skyrocketing Monday has sparked memories of the “gamification” of trading that occurred during the meme-stock frenzy in 2021.
James Clunie, a director at investment consultancy Long-Short Consulting and an honorary professor at the University of Edinburgh, told MarketWatch:
“It seems like an example of the ‘gamification’ of markets. Given Roaring Kitty’s ability to coordinate traders, though, it doesn’t seem irrational for traders to get involved and ‘play.’”
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