GameStop’s stock unexpectedly jumped 67% again on Thursday, after rising 104% on Wednesday. Trading in the stock was halted twice on Wednesday, as its volume was three times higher than the average of the past five days.
This time r/wallstreetbets users are once again responsible for the run in the stock market which is already seeing price appreciation again in other stocks such as AMC, Cannabis Company Sundial Growers Inc. and Najed Brand Group LTd. which were among the most active stocks before the markets opened on Thursday.
Many investors are experiencing deja vu with GameStop’s stock, when in January a group of investors on the Reddit forum, r/wallstreetbets, decided to mass buy shares of companies that had mediocre performance among which were also shares of AMC Entretaiment, BlackBerry, and Blockbuster.
Reddit’s frenezy caused GameStop’s stock to jump 1,600% in a few days at the time, causing millions of dollars in losses for several investment funds that expected the stock price to fall, and leading online brokers like Robin Hood to limit purchases of GameStop and other companies’ shares.
Why did GameStop stock spike again?
A series of events triggered the second rally around GameStop stock again. For starters trader Keith Gill, known as Roaring Kitty on Reddit, testified before the House Financial Services Committee that he bought the stock simply because he liked it.
Gill was one of the users who through a post on r/wallstreetbets started the euphoria over GameStop stock. On Monday, GameStop’s share price jumped 13% to $46, following a massive purchase by Gill who bought about 50,000 shares, in addition to the 50,000 shares he already owned, bringing his portfolio to about $4,000,000 in company stock. As of this writing, Gill has tripled the value of his investment, which is now worth just over $12 million.
Gill’s purchase came as GameStop announced that its Chief Financial Officer, Jim Bell, would be retiring, drawing the attention of investors who expect the video game retailer to migrate from physical video game sales to online sales and begin operating in a manner similar to companies like Steam, Blizzar or Epic Games.
And finally, GameStop board member Ryan Cohen tweeted a photo of McDonald’s ice cream with a frog emoji as the description. What does this have to do with GameStop’s stock price? Absolutely nothing, but r/wallstreetbets users interpreted it differently.
Ryan Cohen’s ice cream seems to have been the trigger the market needed for a mob of euphoric traders to flood Reddit’s financial forums inciting the purchase of GameStop stock, causing the stock price to quadruple in value in less than 2 days.
The influx of users on the r/wallstreetbets forum was so large, Reddit crashed due to high traffic. At 5PM ET service was restored and although somewhat slow for a while, the site’s service was operational again.
The unusual rises in the stock of GameStop and similar companies – with a very low yield but with bullish expectations from buyers – has earned them their own name in the financial world, the meme stocks, stocks whose value will depend more on the massive euphoria of social network users than on their actual market performance.