Roaring Kitty's Comeback Sparks GameStop Chaos

2024

Keith Gill, widely known as Roaring Kitty, made his first on-camera appearance in over three years in a livestream on Friday. This event led to significant volatility in GameStop’s stock price, which fell over 40% from the morning's peak. The trading was halted eight times within an hour as the stock price fluctuated during Gill's nearly hour-long stream.

Gill, a central figure in the 2021 meme-stock surge, reiterated his confidence in GameStop’s strategy and new CEO, Ryan Cohen, during the livestream. He confirmed that screenshots posted on his Reddit account earlier in the week, showing a brokerage account with over five million GameStop call options, were authentic. "GameStop becomes a bet on the veterans, you know—in particular, of course, [CEO] Ryan Cohen,” Gill stated. “I think we’ve seen enough from him to think he’s got a good head on his shoulders.”

Gill's influence on GameStop began in January 2021 when his Reddit posts and livestreams fueled interest among meme-stock traders, pushing the retailer’s stock price up by over 1,000%. After a three-year hiatus, Gill's return was marked by cryptic posts on Twitter that ignited another rally, doubling GameStop's share price at its peak.

When Gill announced his livestream, GameStop’s share price surged nearly 30%, making him a billionaire on paper based on his call options' value. However, the stock dropped by 25% before the stream and fell another 12% during it, erasing his earlier gains. Gill addressed reports that E*Trade might ban him from the platform, showcasing his continued monitoring of his account.

On May 12, Gill posted a meme on his Twitter account that seemed to signal a call to action. The following day, GameStop’s stock rose by more than 50%, reflecting his considerable influence. Gill, known for leading the meme-stock movement on Reddit, became a key figure for amateur investors. His May 12 tweet, his first in nearly three years, spurred a stream of posts that many interpreted as endorsements of GameStop.

Gill’s holdings, revealed in a June 2 Reddit post, included $115.7 million in GameStop stock and $65.7 million in call options. Despite the stock's volatility, Gill remains significantly invested. His livestream, though bizarre with a fake head bandage and arm sling, confirmed his ongoing commitment to his positions.

While promoting stock is not illegal, Gill’s public disclosure of his holdings invites regulatory scrutiny. "You can’t trade and tweet," warned Lisa Bragança, a former SEC branch chief. In 2021, Gill testified before Congress, denying any intention to manipulate GameStop’s stock for personal gain.

The Massachusetts securities regulator is now investigating Gill's recent conduct. The SEC has not commented on the investigation, but a former chair suggested Gill's actions might not be tolerated. Gill’s livestream included a disclaimer advising viewers not to treat his opinions as investment advice, yet his influence on GameStop’s stock price is evident.

Legal experts note that determining whether Gill violated securities laws depends on his trading history and intentions. His actions, like posting about his positions and influencing stock prices, will be scrutinized. When his call options expire on June 21, Gill faces a decision that could impact his legal standing and financial outcome. Securities law requires advance disclosure of stock sales by individuals in his position.

Gill's case raises questions about the boundaries of market manipulation in the age of social media influencers. The SEC may use this opportunity to set a precedent, aiming to deter similar conduct. Former SEC chair Jay Clayton suggested that the agency seeks to prevent further market volatility caused by influential individuals like Gill.

Gill’s story highlights the evolving challenges regulators face in managing modern market dynamics influenced by social media. The outcome of his case could shape future enforcement and the behavior of market influencers.