In a throwback to 2021, GameStop stock is once again seeing a wild spike after meme stock enthusiast and influencer "Roaring Kitty" tweeted for the first time in almost three years.
The post, which depicts a gamer leaning forward and paying attention in their chair, sparked a frenzy among meme stock day traders yesterday, who drove the stock price up as high as 110% throughout the day. Today, the stock is up 68% from its previous close, and is up 76% year-to-date.
— Roaring Kitty (@TheRoaringKitty) May 13, 2024
Amid the stock's sudden surge, a number of individuals on social media have reported trading halts in the last 24 hours. Trading app Robinhood shared a statement with CNN on the pauses, saying the temporary freezes on the stock were the result of market-wide limits kicking in due to increased volatility.
As before in 2021, day traders are taking advantage of investors short selling GameStop stock to drive the price up. Essentially, short selling is an investment strategy where someone borrows stock from someone else, then sells it at a certain price to make money. As long as the stock price remains low, it's not a big deal, as the investor will simply buy the stock back to cover what they borrowed at a lower price and, in theory, make money. But if the price suddenly rises, the investor needs to cover their short, and will have to purchase the stock back at a higher amount than they sold it for, and will lose money. And if a lot of investors are short selling stock and have to cover themselves all at the same time, the price of the stock can be driven even higher as they fight over the limited amount of stock that remains.
What's happening here, as before, is that groups of day traders are taking advantage of these short sellers by buying up cheap stock, driving the price up in something called a "short squeeze" and forcing the short sellers to cover, driving the price up even further. In 2021, Roaring Kitty (aka Reddit user u/DeepFuckingValue, aka Keith Gill) and other online investment influencers drove a frenzy of this exact behavior, causing GameStop's stock price to skyrocket. Gill himself even testified in front of Congress about the phenomenon.
At the time, a number of individuals cited the addition of Chewy founder Ryan Cohen to GameStop's board as a legitimate reason to invest in GameStop. Cohen has since been appointed GameStop's CEO, but the company's actual business has seen an ongoing decline including layoffs, store shutdowns, and other cost cutting measures.
It's unclear what, if anything, the day trading community sees in GameStop this time around, or whether the trading fervor of the last 24 hours will continue to explode as it did in 2021. Notably, both Reddit and AMC have also seen sizeable spikes since Monday along similar lines, though both AMC and GameStop had already been rising steadily throughout the month prior.
Rebekah Valentine is a senior reporter for IGN. Got a story tip? Send it to rvalentine@ign.com.
