LDN - Business

Meme stock world awaits 'Roaring Kitty" livestream, GameStop drops after stock offering

[June 07, 2024] By David Randall and Sruthi Shankar

(Reuters) -Meme stock traders will be glued to their screens on Friday, when Keith Gill, online influencer and a key figure behind the eye-popping rally in the shares of GameStop in 2021, hosts his first YouTube livestream in three years.

The "Roaring Kitty" channel on YouTube, which Gill used to post the videos, showed a livestream schedule for 12 pm ET, boosting the shares of video game retailer more than 47% in the previous session.

But they tumbled 9.4% to $42.32 before the bell on Friday after GameStop reported quarterly earnings four days ahead of schedule and announced plans to raise more than $3 billion by selling up to 75 million shares.

GameStop's first-quarter net sales declined as it grapples with customers turning to e-commerce firms for buying video games and collectibles.

"No matter how much noise somebody makes on whatever platform, at some stage the company will have to generate profits and particularly cash flow to sustain that valuation," said Russ Mould, investment director at AJ Bell.

"The question that everybody needs to ask is has anything fundamentally changed about the company's competitive position in the last month?"

In 2021, Gill's championing of GameStop helped its shares rally by as much as 1,600% before they tumbled. He won a cult-like following among some investors and notoriety with others.

His apparent return sent GameStop shares soaring in recent weeks. They rose nearly 150% since May 13, when an account on X linked to Gill began posting a series of memes that some investors viewed as a sign of him being bullish on the company.

GameStop rose 21% on June 3 after Gill's Reddit account posted a screenshot showing a $116 million bet on the stock. The post, the first from the account in three years, showed a position of 120,000 GameStop June 21 call options at a strike price of $20, worth $65.7 million at last Friday's close.

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Keith Gill, an individual online investor in GameStop, testifies during a hearing of the U.S. House of Representatives Committee on Financial Services, in Washington, U.S., February 18, 2021. House Committee on Financial Services/Handout via Reuters/File Photo

Other names associated with the meme stock phenomenon also fell on Friday, with AMC Entertainment slipping 2.1% and headphone maker Koss down 12.3% after recording double-digit gains in the prior session.

NOT LIKE 2021

While the 2021 rally was fueled in part by retail investors banding together to punish hedge funds that had taken bearish positions in GameStop and other companies, some analysts said the same degree of fervor appears to be missing this time.

"Despite Keith Gill's renewed weekend appearance and ensuing GME price spike, retail traders do not look to be sticking around too long in the trade," analysts at Vanda Track wrote in a note earlier this week.

At the same time, Vanda said, "high-frequency institutional traders are front-running retail's efforts, and performance data demonstrate that this is indeed not turning into a widespread bullish phenomenon for the meme stocks cohort."

Short interest in the stock stood at 19.87% of free float, according to data and analytics company Ortex.

Broader market conditions do not reflect the same speculative energy as they did in 2021, said Jason Draho, head of Asset Allocation Americas at UBS Global Wealth Management.

The IPO market remains dormant, while M&A activity is mild, he said. "Meme stock activity isn't anywhere near it was in 2021, even though we are seeing dramatic one-day moves."

(Reporting by David Randall in New York and Sruthi Shankar, Shristi Achar A and Jaspreet Singh in Bengaluru; Editing by Ira Iosebashvili, David Gregorio and Arun Koyyur)

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