May 14, 2024

GameStop shares jumped on Monday after the architect of the meme stock rally returned to Twitter after a three-year break. 

GME-–-Daily-ChartGME – Daily Chart 

GME shares experienced a significant gap from $17.55 Monday morning to trade above $38, only to slip back to $30. This rapid fluctuation underscores the stock market’s inherent volatility, a factor investors and analysts must remain vigilant about this week. 

GameStop shares surged on Monday, reaching the highest levels since last July after a key person in the 2021 meme stock rally returned to Twitter. 

Keith Gill, known by his alias Roaring Kitty, posted his first message on his X social media account in three years. Shares in the loss-making video game retailer had been trading at around $9 a share and soared as high as $81.25 in a matter of weeks. 

The move in GameStop and other meme stocks led to significant losses at short-selling hedge funds and a period of stock market chaos. Gill ended up testifying before members of Congress. 

The meme stock rally fizzled out, and shares have been in a persistent downtrend since 2021 when Gill stopped posting about the stock. The price closed at $17.56 on Friday with a share with a market valuation of $5.35 billion. Analysts still see that as severely overvalued for a company that’s only had two profitable quarters in the past three years. 

The resurgence in GameStop’s stock price has again put short sellers in a precarious position. Financial analytics group Ortex has warned that Monday’s surge could result in losses exceeding $437 million for those who have bet against the company. Since the stock’s rally in May, short sellers have already incurred losses of over $800 million, a stark reminder of the risks involved in such strategies.

Gill’s return “seems to be the most likely suspect for the renewed interest today… but I would be careful not to characterise the participants in this phenomenon as investors,” said Art Hogan, chief market strategist at B Riley Wealth. “There’s no fundamental change in any companies that are popularised in this phenomenon.”

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