When Keith Gill—aka Roaring Kitty—burst onto the GameStop scene over three years ago to lead an army of Reddit users against hedge fund billionaires on Wall Street, the captivating underdog story left audiences wanting more.
Eight months after his story was immortalized on the silver screen, his sudden return now threatens to play out like a bad Hollywood sequel—banking on nostalgia while lacking any of the original drama and heroism the second time around. Worse, there’s no real villain to fill the shoes of Citadel’s Ken Griffin—and now the main protagonist has gone missing.
Without a narrative compelling enough to go viral, the chances that Gill can marshal his scattered forces and send GameStop shares to the moon again appear to be between slim and none.
“I don’t know what the new story is for this company that would in any way justify the $9 billion valuation,” argues Derek Horstmeyer, a professor of finance at George Mason University’s School of Business in Virginia. “And Gill didn’t seem to be able to articulate what that would be either.”
waiting for Roaring Kitty to post a GameStop PnL screenshot. pic.twitter.com/GGitUlMbKt
— wallstreetbets (@wallstreetbets) June 20, 2024
Since euphoria upon Roaring Kitty's reappearance propelled the stock as high as $48 earlier this month, it has relinquished almost all of its gains. Now it’s trading around the $25 mark, only slightly above the $23.14 close before Gill first revealed on June 2 that he owned 5 million shares.
Roaring Kitty a creature of the lockdown-era zeitgeist
At the time GameStop first became a viral phenomenon, the 38-year-old portrayed it as nothing more than a YOLO trade—a kind of "get rich big or die trying" mentality that analyst and podcaster Demetri Kofinas has taken to calling “financial nihilism”.
Gill even claimed his investment decisions can lack any rhyme or reason and simply result from drawing random cards out of an Uno deck he keeps handy while consulting his Magic Eight Ball.
In that sense, Roaring Kitty was truly a creature of the zeitgeist. At the time, asset prices across the board were artificially inflated by a mixture of zero interest rates and quantitative easing by the Federal Reserve. Pandemic-era stimulus checks put found money in the pockets of everyday Americans at a time when gambling on sports was impossible after COVID eliminated spectator events.
Many discovered they could find all sorts of long shot bets offering a big payout with relatively little money in the options market, which enjoyed one crucial advantage over wagering on the ponies or a heavyweight title fight.
“In sports betting, the more people pile in, the more the odds begin to even up without any effect on the likelihood of the outcome,” Steve Sosnick, chief strategist at Interactive Brokers, told Fortune. But, “if enough speculators buy a particular option at the same time, the greater the chances are that it pays off.”
Trapped at home and seeking community online, a number of small shareholders discovered wealthy hedge funds like Steve Cohen’s Point72 were all heavily short GameStop. Were Gill and his allies to gang together and buy short-dated call options from the likes of Citadel, it would send Ken Griffin’s industry leading market maker and others like it scrambling to secure the underlying shares in order to cover their exposure. The Cohens and Griffins of the world would be tripping over each other bidding up the stock no matter the price.
The time was ripe for a GameStop run, too, since the retailer expected to profit from a lockdown-induced boom in video gaming matched with the launch of a new generation of Sony PlayStation and Microsoft Xbox consoles.
Along with other social media users on the WallStreetBets subbredit, Gill helped catapult the stock to a split-adjusted intraday record of $120.75 in January 2021. The short squeeze that saw its market cap soar to $50 billion was so epic it caught the attention of the White House. A month later Congress held a hearing over it with Gill providing testimony.
Meme stock craze gives way to return to normalcy
Four years later, the story is completely different. The pandemic is over, people are gradually returning to the office and policy tightening by an inflation-fighting Fed means savers are no longer penalized for socking their cash away in money market accounts.
The games industry is in an outright crisis with Sony, the dominant console manufacturer, admitting sales of its PS5 have peaked. Games publishers are shutting down even successful studios and moving away from physical discs that cost money to manufacture and distribute in favor of remote downloads that leave GameStop one business model shy of a future.
The shared sense of community among fellow “apes”, a self-deprecating term used by meme stock traders, is no longer as potent either. All that is left is a residual anger at a system rigged against them.
Waiting for Roaring Kitty to post an update to his GameStop $GME holdings pic.twitter.com/qPjkuBekWr
— wallstreetbets (@wallstreetbets) June 21, 2024
Whether it’s Nancy Pelosi’s mysterious luck at stock picking that prompted calls to ban Congress members trading, the SEC granting Warren Buffett exemption from disclosing his near $7 billion investment in a rival, or hedge funds simply being invited by the media to talk their book all the time, it often feels like the elites can get away with everything.
But it’s hard to crystallize the kind of support needed for a pile-on against bystanders not directly involved in GameStop. Neither Pelosi or Buffett make for convincing enough substitutes for billionaires like Cohen and Griffin, who many believe pulled strings to get stock trading app Robinhood to pause activity when the market moved against them. (Citadel argues the allegations of collusion were thoroughly debunked and a U.S. district judge threw out a class action lawsuit citing lack of evidence).
“Ken Griffin made for a really great villain. GameStop traders really wanted to stick it to Citadel,” Horstmeyer says.
The vitriol was so intense Steve Cohen left Twitter due to threats he claimed were made against his family. This time around there’s no prized scalp worthy of claiming, and latent anti-establishment sentiment is far more amorphous. “There isn’t one concrete face to it,” Horstmeyer adds.
What's his strategy?
If Gill had any ideas how GameStop should reorganize, he hasn’t expressed them since his return. He mainly communicates via guerilla-style memes (merely posting a cartoon dog on social media sent shares in pet supplies retailer Chewy soaring on Thursday).
The one time he actually spoke to his fans, he hosted a rambling hour-long livestream on YouTube where he merely aimed to “reiterate a lot my viewpoints I had previously” rather than update his thesis in light of recent events.
For now, Gill is keeping everyone guessing about his ultimate intentions. At one point he teased viewers on his sole livestream by pulling out his old trusty Magic Eight Ball to ask what the plan is for GameStop—only to shelve it before the round plastic oracle could reply.
“Either he really does believe in this company, or he’s totally nihilistic and just wants to be internet famous,” Horstmeyer continued. “It’s a toss-up at this point.”
There is one new possible twist in the story no one had seen coming: as the company’s second largest individual shareholder, Gill could demand a seat on the board. He seemed to send a hidden message by raising his holding to the exact same number chairman and CEO Ryan Cohen had when he made a play.
— Roaring Kitty (@TheRoaringKitty) June 10, 2024
Gill’s last E*Trade post showed he’s up $50 million, but that’s small fry after briefly being within reach of becoming a billionaire hours before he turned 38 this month. Still—unless he gambles everything away—he looks to be set for life even with ‘just’ $270 million in his E*Trade account. Can Gill, who spent much of the 2010s between jobs, credibly embody the same underdog in GameStop’s ‘us versus them’ narrative?
“My question is who is now the ‘them’?” asks Sosnick. “If you’re not sure who ‘them’ is, ‘them’ is probably you.”
Meanwhile the protagonist himself seems to have gone missing in his own story. WallStreetBets, the social media account that elevated the concept of meme stocks, YOLO trades and loss porn, sounded like a jilted lover this past week. After preaching to its followers that GameStop’s ‘mother of all short squeezes’ was coming any day now, WallStreetBets turned to obsessively posting about Gill.
“Waiting for Roaring Kitty to post a GameStop PnL screenshot, it posted last Thursday, using the sad Pablo Escobar meme from Narcos. 24 hours later it followed with another appeal: “Need Roaring Kitty to give us a sign right now.” On Monday it pleaded for Gill to “drop a banger tweet” before finally complaining that a fortnight had passed without word from the totemic leader.
GameStop has more money than it knows what to do with
Right now the only one truly sitting pretty is GameStop itself. Capitalizing on the sudden renewed interest in Roaring Kitty, it flooded the market with 120 million newly minted shares, diluting everyone including CEO Ryan Cohen, its largest shareholder. Thanks to the two issues, cash on hand quadrupled while its balance sheet doubled in size over the span of four short weeks.
Citron is no longer short $GME. It's not because we believe in a turnaround for the company fundamentals will ever happen, but with $4 billion in the bank, they have enough runway to appease their cult like shareholders. Despite Wedbush setting an $11 target today, we respect the…
— Citron Research (@CitronResearch) June 12, 2024
The company filled its coffers so full that Andrew Left of Citron Research raised the white flag and exited his short. He argued the company is still a basket case but it could survive alone on the back of its cash pile even if its core business implodes. “With $4 billion in the bank, they have enough runway to appease their cult-like shareholders,” Left’s firm said.
GameStop could now achieve profitability by simply investing in ultra-safe U.S. Treasuries rather than selling actual video games, making it the equivalent of a Ryan Cohen family office with a captive brick-and-mortar retail business.
Even the company doesn’t seem to have plans about what to do with all the money now in its bank account. The annual shareholder meeting lasted just a half hour and no questions were taken from investors.
Unless something unexpected happens that can capture people's imagination and galvanize support, social media will not prove as effective at rallying enough troops to sustain a run in GameStop shares this time around.
“It’s like a sequel with no plot,” says Sosnick.
With Gill seemingly on the sidelines for now, maybe he can loan out Cohen his trusty Magic Eight Ball.
