Roaring Kitty's Return Sparks GameStop Surge and Regulatory Concerns
Summary:
After activist investor Roaring Kitty (Keith Gill) came out of retirement on May 13, GameStop's stocks witnessed considerable price volatility. After major surges and falls, GameStop sold stocks to gather nearly $1 billion and subsequently reported a loss of over $32 million. While this competitive stock trading became popular with many investors, critics and regulatory authorities have voiced concerns over the potential for market manipulation and gamification of financial markets. The rise of influencers like Roaring Kitty adds a new layer of unpredictability to the stock markets.
The return of activist investor, known as Roaring Kitty (real name Keith Gill), has proven to be entertaining, yet has triggered alarming levels of trade volatility. Gill came out of retirement on May 13, leading to an immediate 180% surge in GameStop's stocks, from $17.46 to $48.75 at the close of trade on May 14. On May 17, GameStop announced the sale of 45 million shares, thus leveraging the surge to accumulate nearly $1 billion. Concurrently, early results indicated losses of about $27-$37 million for the previous quarter.
Following the announcement, GME stock dropped over 30%, stabilizing only because GameStop declared the news on a Friday, allowing for market closure over the weekend. In the ensuing week, shares continued to plummet, hitting a low of $18.32 by May 23, but experienced some recovery as the month ended.
June 6 saw Roaring Kitty announce a livestream for the upcoming Friday, causing shares to rise by 80% from $26.50 to over $46. During this stream, Gill spoke positively about Ryan Cohen's leadership, while critical voices, including Citron Research, termed it a "mockery of capital markets". Amid these developments, the announcement of a first-quarter loss of over $32 million was made three days earlier than planned, and yet another stock sale following Gill's livestream generated over $2 billion for GameStop. This caused a subsequent decrease in shares by over 50% and led to the NYSE suspending trading 38 times.
On June 9, another cryptic post by Gill seemed to align with the financial success of GameStop. This trading exploit, however, raises serious concerns about market gamification. Indeed, the Massachusetts regulator announced an investigation into Gill's GameStop trades on June 4. The worry stems from the fact that playful activities might lead to market manipulation or fraud in traditional financial arenas.
While no one mourns the losses suffered by hedge funds, the unpredictability introduced by phenomena like the Roaring Kitty cult can be disruptive. Firms like Robinhood and Morgan Stanley have implemented restrictive measures due to the frenzied trading. The rise of influencers in financial markets creates instability, something crypto enthusiasts might tolerate, but is not conducive to the usual operations of the stock market. While the SEC has yet to announce consequential findings, the recent market antics would cause unease among those affected.
About the author: Lucas Kiely, the chief investment officer for Yield App, manages investment portfolio allocations and spearheads the expansion of a diverse range of investment products. He has served as the chief investment officer at Diginex Asset Management, as well as held high-level positions at Credit Suisse in Hong Kong and UBS in Australia. This article is solely for general information, and should not be used as legal or investment advice. The author's views do not necessarily echo the perspectives of Cointelegraph.
Published At
6/21/2024 1:57:38 AM
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