On Monday, the US stock market remained calm on the surface, but several small cap stocks experienced abnormal movements. GameStop triggered circuit breakers multiple times, with a maximum increase of about 100%, closing up 74.4%, and AMC closing up 78%, achieving its best performance in nearly three years. This also triggered memories of retail investors competing with institutions before.
The market movement may have originated from a social media update last weekend. The user named "Roaring Kitty" returned to public view after three years of absence. In a sketch, a man sat up and leaned forward on a chair, seemingly ready to take another action.
This post quickly received over 100000 likes. "Oh my goodness, he's really back," said a user on the game station message board on Reddit forum. "It's that guy who makes hedge funds tremble and people lose sleep."
Roaring Kitty's real name is Keith Gill, and he rose to fame in the stock price fluctuations of Game Station in 2020. A large number of retail investors subsequently began to flock to the derivatives market, "big by small", and "huddled" on social media, especially in the WallStreetBets section of the Reddit forum. People urged each other to buy call options on a certain stock, especially for companies that hedge funds and institutions heavily short, and always adhered to trading principles: never sell, never surrender.
At the beginning of 2021, retail investors fanatically pushed the stock price of Game Station from $3 to $483 within three months, forcing securities firms including Robinhood to restrict severely short selling of stocks to control risks.
Multiple institutions have suffered huge losses, including the hedge fund Melvin. Finally, Citadel and Point72 announced a $2.75 billion injection into Melvin to stabilize the company's operations. Melvin subsequently closed all positions at the game station, conceded and left.
The market turbulence caused by the battle between retail investors and institutions has triggered a series of congressional hearings on the behavior of securities firms and the gamification of retail trading. Representatives of securities firms Robinhood, institutions Melvin, Citadel, forum Reddit, and Gil himself have all been asked to testify.
It is worth mentioning that after this, the stock price of the game station halved in the short term. As the speculative atmosphere far away from fundamentals weakens and individual investor interest fades, this stock, along with other meme stocks such as AMC, has entered a long-term sharp decline pattern.
After hitting a three-year low of $9.95 last month, Game Station has risen over 300% in the first two weeks of this month, and as before, many investors are short selling stocks.
The company operates 2915 stores in the United States and 1254 stores overseas. In late March, the game station said that due to the intensified competition from Wal Mart, Target, Best Buy and other competitors, aiming to completely reform its business, the company had cut an unknown number of jobs to reduce costs, and reported that revenue continued to decline in this quarter. According to data from S&P Capital IQ, the short position ratio of circulating stocks in gaming stations is currently 21%, far lower than the peak of 140% in 2021.
Daniela Hathorn, Senior Market Analyst at Capital, said, "Investors are trying to prove that this is a return of meme stocks, but we haven't seen this happen yet."