GameStop shares extended their extraordinary surge Tuesday, carrying AMC Entertainment along for outsized early gains, as meme stock investors looked to capture the market's attention yet again following Monday's $4 billion surge for the videogame retailer.
GameStop (GME) , which was marked as much as 110% higher at $38.20 a share at one point during yesterday's manic meme stock-session, closed at $30.45 with more than 176 million shares changing hands.
That level of activity, around 18 times the stock's recent daily average, was matched by a massive surge in options trading, with Bloomberg suggesting more than 700,000 contracts tied to GameStop were traded over the whole of the session.
The spike in activity was triggered at least in part by the first social-media post in nearly three years from Keith Gill, an influential retail investor better known by his online moniker, 'Roaring Kitty'.
— Roaring Kitty (@TheRoaringKitty) May 13, 2024
Gill, who worked for a subsidiary of MassMutual when he sparked the meme-stock craze in January 2021, has been largely silent since the stock's meteoric rise at that time.
He appeared before lawmakers on Capitol Hill in February 2021 as part of a House Committee on Financial Services probe into retail investing and insisted that “the idea that I used social media to promote GameStop stock to unwitting investors and influence the market is preposterous."
“My posts did not cause the movement of billions of dollars into GameStop shares," Gill testified.
His cryptic tweets from May 12, however, seem closely linked to the stock's recent surge, and the Wallstreetbets channel on the social-media website Reddit is replete with references to the "man leaning forward in chair" image.
Related: GameStop rockets, pounding short sellers, as 'Roaring Kitty' returns
Not all investors, however, are enjoying the outsized moves, and the spike in GameStop shares has caused massive losses across the board for those betting against the Grapevine, Texas-based group.
Short sellers bet against a company by borrowing shares and selling them. If the price of the stock declines, the short-sellers will buy back the shares at a lower price, return the borrowed stock (while paying a fee), and pocket the difference.
Financial analytics group Ortex estimates short sellers have lost more than $2.5 billion betting against GameStop this month, with around $2 billion of those losses coming during yesterday's session alone.
If early gains hold, short sellers will be down around $1.2 billion, according to Ortex data.
GameStop: Options-market activity in focus
Options market activity, meanwhile, may prove more telling for the near-term movements in GameStop, as yesterday's volume indicated a rather even split between those buying and those selling shares in the retailer.
Options give holders the right, but not the obligation, to buy a set amount of securities at a set price for a set period.
Related: GameStop makes a harsh decision amid declining sales
That likely means the upside moves were driven by a so-called gamma squeeze, where call option sellers, seeking to hedge their risk, will often buy the underlying stock in the open market as its price moves higher.
The can lead to ever-higher share prices, which lead to more options losses, and thus more share purchases, creating in effect a doom loop for that market.
The stock's fundamentals aren't much more supportive.
GameStop has had only two profitable quarters over the past three years. It posted a 20% decline in holiday sales earlier this year, while unveiling a fresh round of job cuts.
The group also declined to host a conference call with analysts, instead directing investors to its Securities and Exchange Commission filings.
Late last year, GameStop said CEO Ryan Cohen would also manage the group's overall "investment policy," which it says "permits the company to invest in equity securities, among other investments."
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Cohen returned to the CEO role in late September, after Matt Furlong was ousted, the fifth CEO to depart the Grapevine, Texas, retailer over the past five years.
GameStop shares were marked 69.9% higher in early Tuesday trading to change hands at $49.58 the highest since February of 2021.
As of Monday's close, the shares have more than tripled and have added more than $6 billion in market value over the past month, with another $5.5 billion added in early trading.
AMC (AMC) shares, meanwhile, were marked 93.1% higher at $10.10 each, following on from Monday's 78% gain, and now carry a market value of $3 billion.
The theater chain, unlike GameStop, has used big upswings in its share price to raise fresh equity capital, doing so again Tuesday with a $250 million at-the-money offering.
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