No matter where you stood during the initial meme stock frenzy of 2021, one thing was certain— the market resembled the untamed West. GameStop (GME) emerged as the frontrunner, sending shockwaves through the market with an unprecedented short squeeze.
While GameStop took the spotlight, other meme stocks, such as AMC Entertainment (AMC), also haunted short-sellers, triggering volatile price fluctuations.
Now, as history repeats itself, it’s crucial to delve into the heart of this frenzy.
The Resurgence of Roaring Kitty
Roaring Kitty, also known as Keith Gill, played a pivotal role in igniting the meme stock craze of 2021. By directing attention towards short sellers, he set off a colossal short squeeze in GameStop stocks, with AMC Entertainment and other heavily shorted stocks feeling the heat as well.
After a period of silence, Roaring Kitty made a social media comeback not long ago, reigniting the passion among meme-stock traders. This resurgence led to extreme volatility in GME shares, reminiscent of the chaos from before.
The Current Landscape for GameStop
Following the release of quarterly results, GameStop faced a downtrend in sales compared to the previous year. The announcement of a $75 million at-the-market offering further dampened investor sentiment, leading to added pressure on GME shares.
The company’s outlook has taken a hit, now carrying a Zacks Rank #5 (Strong Sell). The recent market action, fueled by a short squeeze, does not accurately mirror the company’s current earnings projection.
Parting Thoughts
When heavily shorted stocks start climbing, a vicious cycle commences for short sellers. They are compelled to buy back the shares they borrowed, resulting in significant losses for those unable to cover their positions. Meanwhile, traders revel in the tumultuous ride.
This scenario played out vividly in 2021 with meme stocks like GameStop and AMC Entertainment.