Keith Gill, also known as investor-influencer Roaring Kitty, planned a spectacular livestream to celebrate with his fans in real time that he became a new GameStop billionaire. That collapsed on Friday after the company announced plans to issue new shares.
The bricks-and-mortar retailer that specializes in selling physical copies of console video games said in a surprise filing to the regulator shortly before trading began that it would transfer up to 75 million shares to investors, halting an expected market rally in the title .
“We intend to invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities,” the prospectus said.
For Gill, the sudden share sale has wiped out previous premarket gains, leaving it down 15% in premarket trading.
Instead of reaching the $65-plus threshold likely needed to bring the value of its stock and options in the company near the ten-figure mark, the meme stock has fluctuated wildly around $42.
As a result of the stock offering, GameStop also announced first-quarter results, originally scheduled for Tuesday, which showed its net loss narrowing to $32 million, compared to nearly $51 million in the year-ago period.
The company didn’t seem to appreciate becoming a speculative ball of yarn for the fake cat, warning that its shares “have experienced extreme volatility” in both price and trading volume “that does not appear to be based on the underlying fundamentals of our company.”
If Gill, also known as Roaring Kitty, had decided to exercise his options during his 12pm livestream in the east of the country, he would have sent brokers to create millions of shares from thin air.
Gill’s strategy of sharing screenshots allegedly showing his social media positions, or even just related memes, has raised concerns about whether he is putting so much pressure on speculative corners of the stock market that legitimate trading crosses the line into outright manipulation.
As a result, Morgan Stanley’s digital brokerage arm, E*Trade, has reportedly considered removing Gill from its platform to protect his reputation.
“Oh, I have no doubt that the SEC is already looking at this and investigating it as possible market manipulation. But here’s the key point,” former SEC Commissioner Michael Piwowar told CNBC on Friday, “there’s nothing obvious about what he’s doing that is illegal under the current rules.”
There’s a catch in Roaring Kitty’s fortune
However, there is a catch to Gill’s paper fortune in GameStop.
To reap the benefits of any profits, Gill must exit his position at the highest possible price. However, average trading volumes are probably not high enough to withstand such intense selling pressure from a whale of its size. Instead of digesting the trade, the market would almost certainly choke on the excess shares.
Barring a smart trading strategy, Roaring Kitty might not have been a paper billionaire for long.
This story originally appeared on Fortune.com
