A very basic guide to the latest GameStop stock surge for people who know nothing about finance
Overwhelmed by the news surrounding the GameStop stock surge? Here's what you need to know.
GameStop shares skyrocketed on Monday hours after a content creator known as “Roaring Kitty” shared on social media that he’d bought nearly $116 million worth of the stock.
The creator, whose real name is Keith Gill, has influenced GameStop stock prices multiple times — as recently as last month and most famously in 2021 when Gill led an unprecedented influx of Reddit users to buy up GameStop stocks in response to the company almost filing for bankruptcy.
But why is he doing this? How does he have so much influence over the stock market — and is it legal? We break down everything you need to know about the situation, without you needing to know much about finance and the stock market.
🐈 Who is Keith Gill aka ‘Roaring Kitty’?
Gill, 37, worked as a financial broker until 2021. That’s the same year he started posting analyses of GameStop stock in the Reddit forum r/wallstreetbets, which has 16 million members. He had also been investing in the stock since 2019, believing it to be undervalued.
GameStop, a video game retailer, was struggling to survive at the time because most video game players were switching over to digital downloads. With GameStop projected to file bankruptcy, Gill and his Reddit followers bought thousands of shares, which drove the price of one GameStop share up by more than 1,000%.
According to the Associated Press, GameStop’s “unlikely gains” in 2021 were “the product of a tug-of-war between small investors and big institutions.” Hedge funds like Citron Research and Melvin Capital lost an estimated $5 billion because they didn't believe that Gill and other Reddit users could continue to drive up the stock’s price.
The media subsequently dubbed the situation with GameStop a “meme stock” — a term to describe a stock that gains popularity solely through social media, especially via platforms like Reddit’s r/wallstreetbets.
The movie Dumb Money, based on Gill’s GameStop investment in 2021, claimed Gill was worth $34 million at the time.
In February 2021, a class-action lawsuit was filed against Gill claiming that he had committed price manipulation. In a virtual congressional hearing, Gill denied that he had leveraged any social media influence to purposefully drive up the stock price.
“The idea that I used social media to promote GameStop stock to unwitting investors and influence the market is preposterous,” Gill said.
Gill was not fined, but his former employer was forced to pay $4 million for failing to supervise Gill’s trading and online activity.
Gill disappeared from social media sometime in mid-2021, only to return on May 12 with a cryptic tweet to his 1.4 million followers — depicting a meme of a gamer leaning forward in a chair, to indicate “when things start getting serious” in the game.
📈 Why is GameStop stock going up again?
After Gill posted the gamer meme on X, even without the mention of GameStop or stock, GameStop stock surged again.
On June 2, a Reddit account that’s been connected to Gill and hasn’t posted since April 2021 posted a screenshot of an E-Trade account with GameStop shares. E-Trade is an online trading platform and a subsidiary of the bank Morgan Stanley.
The post had around 21,000 comments, with users cheering Gill’s return and chiming in to say they would be buying GameStop stock the following morning. On June 3, GameStop shares shot up by 21%.
Gill is now the fifth-largest shareholder in GameStop.
Read more on the details of the GameStop share price surge from Bloomberg.
🕵️ A big question lingers about whether Gill is actually behind this
Unlike the 2021 GameStop rise, Gill has not posted a single new video showing his face and talking about why he’s making these decisions. His X account has only been posting GIFs and memes that never explicitly mention GameStop nor E-Trade. His screenshots uploaded to Reddit could not be independently verified by other financial-focused outlets, like CNBC and Bloomberg.
💸 What happens next?
When Gill bought his GameStop stock, he had a strike price of $20 that expires on June 21. So people are just waiting until June 21 to see what happens.
Basically, Gill bet that on June 21, GameStop stock prices will be $20 or higher because of how many people are buying it up. If that’s true, he can continue buying more stock at $20 while others have to buy at the increased price, meaning Gill will basically earn the difference between the increased stock price and $20.
If the stock price is lower than $20 on June 21, he will lose money.
⚖️ Wait, is this legal?
According to a report from the Wall Street Journal, E-Trade is considering kicking Gill off the platform.
Stock manipulation, which is designed to trick investors by controlling or intentionally affecting the price of stocks, is illegal in most cases because it “undermines the integrity of financial markets,” a California-based law firm that specializes in federal crimes explained in a blog post.
But stock manipulation can be very difficult for regulators to prove.
As of June 3, no decision has been made about whether to pursue action against Gill. The Wall Street Journal reported that some Morgan Stanley employees were concerned that kicking Gill off the platform would result in his tens of thousands of followers also leaving E-Trade.
However, a spokesperson for the Massachusetts Securities Division told the outlet that it is also investigating Gill’s activity.
