The legendary investor has returned from the dead. He gave a sign of life in an unusual way, the stock exchange caught fire

On Monday, GameStop shares rose by as much as 110% at one point – from less than $17 to almost $37 per share. A moment later there was a correction to $28, but since then the company’s capitalization has continued to grow and on Tuesday GameStop shares cost $30.45. This is due to the enigmatic entries of user X, Roaring Kitty, who has not spoken for three years. This is an investor who started a craze for GameStop shares in 2021, which ended in a huge brawl.

GameStop shares skyrocketed. This was caused by the return of the legendary investor

The last entry of Roaring Kitty, i.e. Keith Gill, is from June 2021. After the GameStop scandal ended, Gill disappeared from public space. On Monday, however, his X account became active again. First, there was an image of a man who, while playing on the console, stands up and takes a pose that suggests that the serious game is only just beginning. The entry received 23 million views by Tuesday. But that’s not the end, because Roaring Kitty posted a dozen or so video collages with fragments of film scenes, the meaning of which is quite difficult to interpret. However, it is difficult to get the impression other than that Keith Gill is returning to public life and has prepared a bomb for this occasion.

The Return of Roaring Kitty is extremely popular. This is evidenced not only by the rising shares of GameStop, but also by the flood of memes about it. However, the increase in the company’s capitalization is not only due to the return of the legendary investor. The company’s shares started to grow again at the beginning of May, a dozen or so days before Roaring Kitty gave a sign of life. Over the last three weeks, the increase has reached almost 300%.

There is still a lot of interest in GameStop’s short position, even though Keith Gill (as well as another legendary investor, Michael Bury) have proven time and time again that the company has solid foundations and will not go bankrupt so quickly. And this is what people who play the so-called shorts. As much as 24 percent GameStop shares sold are shares sold “shortly”, which is a result significantly above the market average –

Playing on declines (so-called shorts) involves borrowing shares from a broker, which you then have to give back to him (the shares, not the money for which we bought them). So let’s assume we borrow 10,000. shares, worth PLN 20 each at the time of the loan. We sell them all just before the price drops, earning us PLN 20,000. zloty. If we correctly predicted the drop in shares, which amounted to, let’s say, half (from PLN 20 to PLN 10 per share), then the same PLN 10,000. we buy back the shares after a while for 10 out of 20 thousand. PLN that we earned earlier. We then give all the shares to the broker and we are left with PLN 10,000. PLN net profit. Although this is a legal investment strategy on most stock exchanges, it raises ethical doubts because it involves betting on the collapse of a given company. This is exactly what the fuss over betting on the declines of the American company GameStop was about. Then, small investors from the Reddit forum bought the company’s shares en masse, which stopped their decline. The funds that were betting on this decline could not buy them back at a lower price and lost a large amount.

How breams defeated the bigwigs of Wall Street. History of short positions on GameStop

Wall Street investors in 2021 have been betting on the decline in the value of Gamestop’s shares for a long time. Suddenly, however, the company’s value stopped falling and instead began to skyrocket. This is thanks to a thread on the Reddit forum /wallstreetbets. Keith Gill, who also ran a YouTube channel, published his analyzes there under the pseudonym DeepFuckingValue. The analysis regarding GameStop was so convincing that small investors began to buy the company’s shares en masse.

Hedge funds that bought the company’s stock, hoping it would fall, lost billions of dollars, and small investors made millions. Gill himself was to initially invest PLN 53,000. dollars, which he eventually converted into items worth $50 million, and earned $33 million from the operation itself. GameStop shares rose so much that the Robinhood app that made it possible (thanks to it you no longer had to go to a broker to invest)

And they are hardly surprised, because the US Securities and Exchange Commission also had doubts about the entire action. Ultimately, Keith Gill had to testify before the Congressional Financial Services Committee. During the hearing, he assured that he had no inside information about GameStop and did not encourage anyone to buy or sell shares for his own profit. – I didn’t know any people in this company, I never talked to any insiders. As an individual investor, I used publicly available information to analyze the market and the value of individual companies. Like many people, I posted my thoughts and analyzes on individual companies and their valuation on social media. I did that with GameStop. I believed that the company was dramatically undervalued, and the analyzes assuming its imminent collapse were simply wrong – Gill is quoted by FXMag.

Apart from him, Michael Bury, one of the heroes of the movie “The Big Short”, who predicted the 2008 crisis, has been investing in GameStop for years (but quietly), thanks to which he became significantly richer. Burry also believed that the rumors about GameStop’s death were exaggerated and that the company had much stronger foundations than the then-current share valuation would indicate. What arguments did the legendary investor have on his side?

– For example, the fact that in 2020 the premiere of new consoles took place – PlayStation 5 and Xbox Series X. Both devices have physical drives. The physical game distribution market should continue to be quite dynamic in the next few years. Moreover, in the meantime, the situation of GameStop itself began to change for the better. In January this year Ryan Cohen, a well-known American entrepreneur who has successfully developed many online businesses, joined the company. So hope has returned that GameStop can achieve a successful transformation –

Ultimately, MassMutual was fined $4 million for failing to supervise the investing and internet activities of their employee, Keith Gill. But in October 2021, the Securities and Exchange Commission (SEC) released a 45-page report concluding that there was no market manipulation of GameStop shares.

Wall Street funds have teams of analysts working together and criticizing each other’s investment ideas, while individual investors have no such advantage. Platforms like YouTube, Twitter and the WallStreetBets forum on Reddit give us this opportunity

– Gill testified.