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Shares in video game retailer GameStop and cinema group AMC Entertainment surged for a second consecutive session on Tuesday, extending a ferocious “meme stock” rally that was sparked this week by the re-emergence of a popular day trader.
GameStop and AMC rose 60 per cent and 32 per cent, respectively, on Tuesday, building on 73 per cent and 77 per cent gains on Monday. Trading in GameStop was briefly halted for volatility three times in the first 20 minutes of Tuesday trading.
Both stocks had pulled back from highs hit earlier in the day, losing some momentum in afternoon trade.
The sharp moves higher come after bandanna-wearing trader Keith Gill — known as “Roaring Kitty” — appeared to resurface on Sunday after a three-year hiatus from social media site X. Gill was at the heart of a rally driven by an army of retail traders during the pandemic.
Eagle-eyed traders reacted with glee to his ambiguous posts, piling back into many of the meme stocks, including GameStop and AMC, whose prices hit dizzying highs in early 2021.
“Gamestop and AMC were the mascots, the poster children, of the [2020-2021] meme stock movement,” said Dhruv Chand Aggarwal, an assistant professor of law at Northwestern Pritzker School of Law, who last year co-authored a paper on the pandemic-era “meme stock frenzy”.
“Could I have predicted the return of Roaring Kitty? Probably not. But I’m not that surprised that meme surges persist,” he added.
Trading volumes for GameStop and AMC on Monday were 15 times and 20 times their 20-day averages, according to Bloomberg data.
Galvanised by Roaring Kitty and other social media celebrities, retail investors who in late 2020 were stuck at home under pandemic restrictions — but also flush with government stimulus cheques — banded together on sites such as Reddit’s wallstreetbets to take on hedge funds that were betting against the shares of struggling companies.
Melvin Capital, which had a large short position in GameStop in late 2020, became the traders’ most high-profile victim, caught out by a lightning rally that eventually wiped out half of its $13bn fund.
Data from S&P Global measuring the scale of short positions showed that just under 30 per cent of GameStop shares were on loan ahead of Monday’s share price leap. While that figure was up from 20 per cent a month ago, it remains far below the levels of almost 100 per cent of shares on loan in the run-up to the original meme stock frenzy.
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