Traders work at the post where GameStop is traded at the New York Stock Exchange on June 3.Brendan McDermid/Reuters
In a year when a former U.S. president has become a convicted felon, bitcoin has rallied 70 per cent and Taylor Swift’s surging in popularity has been drawing comparisons to Beatlemania, perhaps it is little wonder that meme stocks are back in the spotlight.
In 2024, extreme is normal.
GameStop Corp. GME-N jumped as much as 74 per cent at the start of trading on Monday, after Keith Gill – known better by his online moniker Roaring Kitty – implied on Sunday, through a screenshot, that he holds five million shares in the video-game retailer.
That’s more than six times larger than the size of Mr. Gill’s previously known equity stake in GameStop (after adjusting for a share split) at the height of the meme-stock phenomenon in 2021.
As investors pounced on the news and fans of the 37-year-old trader cheered online, Monday’s initial rally delivered Mr. Gill a gain – on paper at least – of about US$85-million in a matter of minutes, not including his additional options contracts.
The broader response to Mr. Gill’s online post looked even more astounding.
GameStop’s market capitalization, based on the value of its outstanding shares, initially increased by more than US$5-billion. The combined value of shares trading hands on Monday morning eclipsed Apple Inc. within the first hour, according to Reuters.
When the meme-stock phenomenon entered mainstream discussion three years ago, often with tsk-tsking from established investors who warned of absurd valuations and flimsy business models of the companies involved, it was initially linked to two temporary aspects of the COVID-19 pandemic: too much time and too much money.
Free stock trading on online trading platforms, such as Robinhood Markets, may have helped drive the trend. Small retail investors could wager small amounts of money on a stock without worrying about mounting fees hobbling their returns.
Though the meme-stock phenomenon spawned a movie and a number of academic papers, it appeared to fade as time and money grew more constrained. Former hot stocks – not just GameStop, but AMC Entertainment Holdings Inc. and Peloton Interactive Inc. as well – turned tepid at best.
By mid-April, 2024, GameStop’s share price had declined to US$10.42, its lowest level in more than three years (adjusted for a four-for-one share split in 2022).
The latest resurgence isn’t entirely surprising, given recent stirrings of meme-like behaviour in the stock market.
Donald Trump’s social-media company, Truth Social – now Trump Media and Technology Group Corp. DJT-Q – looked like a proxy for the ex-president’s rising political fortunes earlier this year. Despite large losses and weak revenue, the company is valued at a meme-like US$8.7-billion.
In May, AMC Entertainment jumped 135 per cent over the course of two trading days, after investors responded to a vague post from Mr. Gill. GameStop also rallied in May after the same post.
But there is another aspect to this latest version of the meme-stock phenomenon: It arrives when nothing seems out of the ordinary any more.
The conviction of Mr. Trump for falsifying records as part of a hush-money cover-up is certainly part of this extreme environment.
There are plenty of others. The Dow Jones Industrial Average recently touched a record high of 40,000, surpassing a psychological threshold. Bitcoin recently surpassed US$70,000. Nvidia Corp.’s share price has surged more than 190 per cent over the past year, as the artificial-intelligence investing theme rolls on.
Even Taylor Swift fits in here. She enjoys the sort of extreme popularity that hasn’t been seen in a pop star in decades, if ever. She generated an estimated US$1.8-billion in revenue in 2023, according to Billboard – and she seems to be doing okay this year, too.
With this sort of backdrop, GameStop’s latest rally looks like it is part of a broader trend, where little can surprise us any more – including what comes next.
Has Mr. Gill already sold his GameStop position? Is Mr. Gill raising concerns among some market participants that, through social-media posts, he may be manipulating stocks for his own gain? If so, it sounds like just another day.