The astronomical move in GameStop (NYSE:GME) continues Tuesday, as GME stock rockets from an opening price near $88 to over $110 a share. Joining the high-flying company on the adventure today is Chamath Palihapitiya, the legendary investor behind Social Capital. What do you need to know now?
To start, the GameStop story truly is a months-long saga. A turnaround narrative emerged in September when Chewy (NYSE:CHWY) founder Ryan Cohen announced a sizeable stake. Since then, investors have been speculating on GME stock on hopes it can embrace e-commerce and turn its video game retail business around. More importantly, users of Reddit and its r/WallStreetBets seem to believe GameStop is the best stock on Wall Street.
The recent rally has no doubt been volatile, and critics have not wasted any time piling on GME stock hate. However, nothing has been able to really slow GameStop down. When Citron Research announced an anti-GME livestream, hacking concerns led Andrew Left to cancel. Other firms are avoiding GameStop entirely, halting coverage of shares.
Palihapitiya is throwing more fuel in the white-hot fire today. On Twitter (NYSE:TWTR), he asked his followers what he should buy. He said that if anyone convinced him, he would throw a “few 100 k’s” at the stock in question. Later, he updated his followers with news he purchased February call options on GME stock with a $115 strike price.
Tell me what to buy tomorrow and if you convince me I’ll throw a few 100 k’s at it to start.
Ride or die.
— Chamath Palihapitiya (@chamath) January 26, 2021
So what does this mean for GME stock?
GME Stock: Palihapitiya Dives In
Investors are likely celebrating news that Palihapitiya chose GME stock for his social media-sleuthed investment. Importantly, Palihapitiya has a lengthy track record, especially with special purpose acquisition companies. His first SPAC brought Virgin Galactic (NYSE:SPCE) public. Since then, he has supported Clover Health (NASDAQ:CLOV), Opendoor (NASDAQ:OPEN) and SoFi. Yesterday, he even threw some weight behind solar and real estate deals.
For investors then, the backing of Palihapitiya brings his track record and an air of legitimacy to an otherwise highly speculative stock.
However, before buying GME stock solely on the news today, there are two important caveats. The first is that the GameStop story is already well in motion thanks to the power of social media users. Sure, Palihapitiya brings a big name to the game. But r/WallStreetBets is flexing its stock market muscles to great success even without that backing. Additionally, Palihapitiya made this buying choice based solely on his followers. He also said that GME stock would not be a significant piece of his portfolio.
What does this mean? Consider Palihapitiya buying in as another piece of evidence that anything is possible for GameStop. However, you should know that GameStop comes with its own risks and be prepared to do your own research.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.