HomeBusinessWhy GameStop and AMC meme craze is an 'outlier event'

Why GameStop and AMC meme craze is an ‘outlier event’

Influential trader and analyst Keith Gill’s return to social media sparked a rally in GameStop and other so-called meme stocks this week. – House Financial Services Committee/AP

GameStop Corp. shares. and AMC Entertainment Holdings Inc. soared this week after trader Keith Gill, aka ‘Roaring Kitty’, made his high-profile return to social media after a three-year hiatus.

Gill was an influential figure in the 2021 meme stock frenzy, and his flurry of posts on

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Other heavily shorted stocks – including SunPower Corp. SPWR, Maxeon Solar Technologies Ltd. MAXN, MicroCloud Hologram Inc. HOLO, Children’s Place Inc. PLCE, Beyond Meat Inc. BYND, Spirit Airlines Inc. SAVE and Plug Power Inc. PLUG – were also noted. swept up in the latest meme stock wave.

Facts: The shares with the heaviest short interest

“It felt like the market briefly went back to 2021 this week after GameStop shares soared as much as 119% on Monday morning, based on a single tweet posted by Keith Gill (aka Roaring Kitty), the meme’s infamous central figure stock frenzy of 2021,” CIBC Capital Markets analyst Stephanie Price wrote in a note published Thursday. “Rising interest rates had cooled the meme stock craze over the past two years, and until now, Mr. Gill’s Twitter account had been silent since his 2021 testimony before Congress.”

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“This week’s moves have many wondering whether Roaring Kitty’s return to social media is a signal that retail traders are once again looking at struggling companies and heavily shorting stocks,” she added.

Related: These behavioral trends were the driving force behind GameStop and AMC’s Meme stock rally

Victor Ricciardi, visiting professor of finance at Ursinus College and co-author of the book “Advanced Introduction to Behavioral Finance,” told MarketWatch he was fascinated, if not surprised, by this week’s events. “Human behavior tends to repeat itself,” he said.

But Ricciardi added that the size of this week’s meme stock rally should not be overestimated. “It’s not a real economic event for the average investor – that’s why I wouldn’t like to call it a bubble,” he explained. “It’s not a bubble that affects the overall market; it is more of an overreaction or an outlier focusing on a small group of investors.”

Related: AMC meme stock rally ‘is just pure hype,’ says analyst

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After surging on Monday and Tuesday, shares of GameStop pared their gains from Wednesday before falling 30% in Thursday’s session and falling further by 19.7% on Friday. Shares of GameStop have fallen 54.4% over the past three trading sessions, logging their worst three-day stretch since the period ending Feb. 4, 2021, when they fell 76.22%, Dow Jones Market Data shows.

Shares of AMC have been on a similar trajectory this week. After skyrocketing on Monday and Tuesday, the stock tumbled on Wednesday and Thursday, ending Friday’s session down 5.2%.

A number of experts have weighed in on the meme stock rally this week. Dan Raju, CEO of cloud-based financial services firm Tradier, on Monday viewed GameStop’s run-up as “unwarranted short-term madness,” while Cory Mitchell, an analyst at investment information website Trading.biz, described AMC. trade Wednesday as “just pure hype.” The rally also brought back memories of the “gamification” of trading during the meme stock heyday of 2021.

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Related: GameStop’s meme stock rally is ‘unwarranted short-term madness,’ brokerage CEO says

There was a twist in the week’s events Friday morning when GameStop issued a quarterly earnings and sales warning while filing to issue more shares. Analyst firm Wedbush Securities rated the stock offering positively and raised its GameStop price target from $5.60 to $7 on Friday.

“When life gives you lemons, file a shelf,” Wedbush analyst Michael Pachter wrote in a note. “GameStop is taking advantage of a recent spike in its stock price by cautiously issuing shares at a premium, providing itself with a higher level of reserves as it struggles to refocus its operations and reverse persistent operating losses.”

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