(Bloomberg) — Shares of GameStop Corp. fell in early trading after the video game retailer announced it would sell up to 75 million additional shares, just hours before Keith Gill’s long-awaited return to YouTube.
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The company also released first-quarter results ahead of schedule, showing that net sales declined in the first quarter. GameStop shares fell as much as 19%, erasing an earlier rise of more than 37%.
Gill has contributed to recent billion-dollar swings in its stock price, which has risen 167% since returning to X with a cryptic meme on May 12, adding $11 billion to GameStop’s market value in that period. On Friday, investors awaited Gill’s first livestream in more than three years.
The latest surge had boosted his apparent position in the company to more than $500 million, when taking into account common stock and call options, according to a post on Reddit on June 6. Now the video stream could serve as yet another catalyst for the meme stocks. , as about 15,000 YouTube users have asked to be notified when it starts at noon in New York.
“I have no choice, right?” said Steve Sosnick, chief strategist at Interactive Brokers, when asked if he would watch. “There’s a lot of mystery here, and until it’s like Scooby-Doo where they take the mask off the guy, we don’t really know what’s going on.”
Cryptic messages from Gill’s Roaring Kitty The stock’s rise over that stretch comes despite the video game retailer selling nearly $1 billion worth of stock and providing preliminary sales figures that showed declining revenue.
Bullish speculation
Gill’s return to YouTube led to further speculation that he is bullish on GameStop, even though his post did not include any information about what he plans to discuss or whether he will announce any new positions. However, the YouTube post included a disclaimer warning that the video would be opinion-based, along with the familiar legal language that says past performance is not indicative of future results – something that had not appeared in previous posts from the account.
“This YouTube channel has no obligation to update or correct the information contained in these videos,” the disclaimer read in part. “Statements and opinions are subject to change without notice. No compensation will be received by this YouTube channel for the opinions expressed.”
Instead of investors buying the company’s stock based on fundamentals, Gill’s influence was enough to send chat rooms and social media platforms into overdrive talking about the stock.
“He’s the shaman for this group,” Sosnick said. “And if he’s really involved and orchestrating this thing, then that’s what his followers would want it to be.”
GameStop’s stock price “is completely disconnected from its business,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners, who added that she will not be among the thousands watching the “spectacle” of Gill’s return .
Investing in meme stocks became all the rage in 2021 as cash-rich retail investors turned to short-selling hedge funds during the height of the pandemic, sending stock markets soaring. The mania delivered huge losses for the likes of Gabe Plotkin’s Melvin Capital Management, which was forced to close, and rich returns for those who gambled early in the frenzy before stocks like GameStop collapsed.
The latest rally in GameStop stock has also left skeptical investors in stitches. Thursday’s gain alone caused short sellers nearly $1 billion in mark-to-market losses, according to data analytics firm S3 Partners. These bearish investors are now down nearly $1.4 billion this month, the company’s data shows, despite shorts buying 2.2 million shares to cover bearish bets over the past 30 days.
Great position
Earlier this week, Gill shared a screenshot on Reddit that showed he owned $116 million worth of GameStop stock. A position of this size would make Gill one of the company’s top five investors. It’s also more than six times the number of shares its account showed in an April 2021 post, the last time it was active on Reddit, when it factored in a four-for-one stock split.
Gill has profited significantly in 2020 and 2021 from investments in the troubled video game retailer. His recent social media activity, starting with a cryptic
This week, a Reddit post showing the huge stakes combined with another X-post sent shares higher as Gill showed an image of an upside-down card from the game UNO that allows a player to reverse the direction of play.
The messages and the market’s reaction to them have sparked conversations about whether Gill’s actions on social media could amount to market manipulation. Online broker E*Trade is considering banning Gill from its platform, in part because of his influence over the stock, the Wall Street Journal reported earlier this week.
“What the government would have to show to pursue a market manipulation theory is manipulative intent,” said Pillsbury partner David Oliwenstein, a member of the firm’s Corporate Investigations & White Collar Defense team and former senior advisor at the Market Abuse Unit of the SEC.
Gill’s apparent promotion of X using videos and memes seemingly unrelated to the company took his behavior into “uncharted territory,” Oliwenstein said. But “the elements of a market manipulation claim remain unchanged. It is a matter of using the current fact pattern to prove manipulative intent,” he said.
“It’s safe to assume the SEC will at least scrutinize the trading,” Oliwenstein said.
–With help from Carmen Reinicke, Subrat Patnaik and Wojciech Moskwa.
(Updates to add offers and results)
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