Keith Gill, the trader known as Roaring Kitty, may have returned to backing games retailer GameStop (NYSE:GME), and GME stock is rising.
His re-appearance came in the form of a tweet showing a man holding a game controller and leaning forward. CNBC said this means he’s taking the GameStop trade seriously.
As a result, GME stock jumped over 40% overnight. The shares opened today at $26.33. That added about $2 billion to the company’s market capitalization, which opens at $7.4 billion.
Meme Again Begin Again
GameStop was at the center of the “meme stock” craze of 2021. Traders organized on Reddit (NASDAQ:RDDT) pushed stocks much higher against short sellers than their fundamental values.
In the case of GameStop, shares traded as high as $145 each before falling back. Ryan Cohen, the Chewy (NASDAQ:CHWY) co-founder who helped lead the trade, wound up as chairman. He now owns about 12% of GameStop’s common stock. Another 24% of GameStop’s stock is currently being held short.
Under Cohen, GameStop hasn’t grown and is only marginally profitable. In its third-quarter report, for the three months ending Feb. 2, GameStop earned $63 million, 21 cents per share, on revenue of $1.79 billion. The Christmas quarter is usually the best of the year for retailers. GameStop lost money in the two previous quarters.
While traders at Stocktwits were excited over the tweet, there’s no hard evidence that Roaring Kitty is building a position in GameStop. Traders at Stocktwits were also generating interest in AMC Entertainment (NYSE:AMC), another beneficiary of the meme craze. Shares in the movie theater chain jumped 16% overnight.
Gill could indeed be getting back into GameStop or looking at other targets for his meme stock games. The intensity of his support should, however, warn shorts that they could be his next target.
GME stock: What Happens Next?
The return of Gill indicates that “animal spirits” are back in the market, and we might be headed for a 2021-like rise, and fall, in heavily shorted shares.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
