GameStop Stock Skyrockets As 'Roaring Kitty' Returns: Is GME Short Squeeze 2.0 Imminent?

Zinger Key Points
  • GamesStop stock has been roaring since Monday and has gained 100% in pre-market trading by 8 AM ET on Tuesday.
  • The surge is driven by user 'Roaring Kitty's' comeback after 2021, and GME stock's high short interest and days-to-cover ratio.

GameStop Corp GME stock is roaring since Monday, along with other ‘meme stocks’ after retail investor Roaring Kitty made a return to social media via a post on X. The stock was up over 100% in pre-market trading on Tuesday.

‘Roaring Kitty’ Is Back

Roaring Kitty, whose real name is Keith Gill, is known for his role in the GameStop short squeeze in early 2021. He shared his investment thesis on GameStop on Reddit’s WallStreetBets forum, advocating for the stock and highlighting what he believed was an undervalued opportunity.

His posts and videos discussing GameStop gained significant attention and helped fuel the buying frenzy that led to a sharp increase in the stock price, causing heavy losses for some hedge funds that had shorted the stock. Melvin Capital, a hedge fund who had heavily shorting GameStop stock back then, had become a focal point of discussion as the squeeze unfolded. The fund suffered significant losses, leading Point72 and Ken Griffin‘s Citadel to provide nearly $3 billion in financial support to stabilize Melvin’s finances.

On Monday, Roaring Kitty started posting again on Twitter after a three-year hiatus which began in June 2021, reminding readers of his GameStop bull case.

GameStop Stock Soaring – Short Interest At 25.8% – Short Squeeze 2.0?

GameStop stock closed the trading day, Monday, at $30.45 – up 74.40% for the day. So, up until Friday, the stock has gained just 4.74% YTD. News regarding Roaring Kitty being back, pumped up this ‘meme stock’ by as much as 70%.

Also Read: Is GameStop Surge After ‘Roaring Kitty’ A ‘FOMO’? Expert Warns ‘Retail Investors Need To Be Wary’

GameStop stock currently has a high short interest of 60 million shares, representing 25.8% of float. The current days-to-cover ratio stands at 12.73.

The ‘days-to-cover ratio’ shows how many days it would take for short sellers to buy enough stock to cover their short positions, based on the average trading volume. A high days-to-cover ratio may indicate that there is significant short interest in a stock, which could lead to a short squeeze if positive news causes the stock price to rise, forcing short sellers to cover their positions at a loss.

A days-to-cover ratio above 5 or 6 is often considered high and may increase the likelihood of a short squeeze if positive news causes the stock price to rise, forcing short sellers to buy back shares to cover their positions.

Other ‘Meme Stocks’ Gaining On The Frenzy

Roaring Kitty’s comeback not only pumped GameStop stock, but also other ‘meme stocks’ such as Reddit Inc RDDT which was up 8.71% on Monday. AMC Entertainment Holdings, Inc. AMC closed the day higher by 78.35% and Faraday Future Intelligent Electric Inc. FFIE was up 32.32% on Monday close.

Looking at these stocks from the squeeze perspective:

  • Reddit stock, being in its infancy, is still building the momentum and investor base to enable a squeeze, if the conditions arise.
  • AMC has a whopping 50.7 million in short interest, representing 18.4% of its float. However, a days-to-cover ratio of 2.79 could potentially help the stock avoid a squeeze.
  • Faraday Future has 24.1 million shares short, representing 56.9% of its float. However, the days-to-cover ratio has been reducing and is down to 1.

As retail investors continue to wield influence in the market, the resurgence of these “meme stocks” serves as a reminder of the evolving dynamics in the world of investing, where social media and online communities can have a profound impact on stock prices and market behavior.

Read Next: GameStop Stock Pumps, But What About The GameStop Meme Coin?

Photo: Shutterstock

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