No one can deny the sheer exhilarating chaos that enveloped the market during the meme stock frenzy of 2021. It was an unruly ride through the tumultuous terrain of the stock market.
Amongst the cacophony of stocks, GameStop (GME) emerged as the reigning champion – a disruptor that sent shockwaves through the market with a short squeeze of unprecedented proportions.
And let’s not forget, other meme stocks like AMC Entertainment (AMC) also played a significant role in tormenting short-sellers, triggering violent fluctuations in stock prices.
Now, as fate would have it, they are back. Let’s delve deeper into this renewed mania.
The Resurgence of Roaring Kitty
Remember Roaring Kitty, aka Keith Gill? He was the face of the 2021 meme stock saga, catalyzing the frenzy by turning the spotlight on short sellers. This led to a monumental short squeeze in GameStop shares, with other heavily-shorted stocks, including AMC Entertainment, joining the party.
After a period of calm, Roaring Kitty resurfaced on social media not too long ago, shattering years of silence. Meme-stock enthusiasts heeded the call, resulting in extreme volatility in GME shares.
GameStop’s Current Position
Today, GameStop disclosed its quarterly results, revealing a substantial decline in sales compared to the previous year. Following the announcement, GME shares faced downward pressure, compounded by the company’s revelation of a $75 million at-the-market offering.
The company’s outlook has taken a hit, with the stock currently sporting a Zacks Rank #5 (Strong Sell). The recent frenzy, driven by a short squeeze, does not accurately mirror the company’s current earnings forecast.
When heavily-shorted stocks start climbing, it triggers a brutal cycle for short-sellers, forcing them to close their positions and repurchase borrowed shares. This results in substantial losses for short sellers who fail to cover their positions, while traders revel in the rollercoaster ride. That was the narrative in 2021 with meme stocks like GameStop (GME) and AMC Entertainment (AMC).
