Equities

GameStop, AMC Surge Then Dip in Meme Stock Revival

Meme stock frenzy returns with GameStop tripling, AMC up 135%, despite a short-lived rally and over $1 billion in short seller losses.

By Alex P. Chase

5/16, 10:22 EDT
AMC Entertainment Holdings, Inc.
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Key Takeaway

  • GameStop and AMC shares surged, tripling and climbing 135% respectively, before falling 19% and 20%, showing volatile meme stock activity.
  • "Roaring Kitty" reignited interest in meme stocks among retail traders, influencing a brief resurgence in trading volume.
  • Despite over $1 billion in paper losses for short sellers, the impact was less severe than in 2021; AMC used the rally to reduce debt.

Meme Stock Rally Returns

Wall Street experienced a resurgence of meme stock enthusiasm this week, reminiscent of the 2021 frenzy. GameStop Corp. and AMC Entertainment Holdings Inc., central figures in the previous meme stock wave, saw their shares soar with GameStop tripling and AMC climbing 135% over two days. This surge occurred despite no fundamental news driving the increase. However, the momentum was short-lived, with GameStop and AMC shares falling 19% and 20%, respectively, on May 15. The trading volume for these stocks significantly exceeded their average, highlighting the intense but fleeting investor interest.

The Role of "Roaring Kitty"

Keith Gill, known as "Roaring Kitty," a key figure from the 2021 meme stock phenomenon, re-emerged on social media, sparking renewed interest among retail traders. His post on X (formerly Twitter) reignited discussions across various online platforms, drawing attention back to meme stocks like GameStop and AMC. Gill's influence stems from his pivotal role in encouraging a wave of retail investors to challenge Wall Street's short-selling practices, particularly during the GameStop short squeeze. His recent activity has brought meme stocks back into the spotlight, albeit with a different market backdrop compared to 2021.

Wall Street's Involvement and Short Sellers' Fate

This iteration of the meme stock rally saw significant participation from sophisticated investors, including those using algorithms and machine learning for momentum trading. Retail trading data from Fidelity indicated more sell than buy orders for meme stocks following Gill's post, suggesting that individual investors were taking profits. Short sellers, who had previously faced substantial losses during the 2021 rallies, encountered over $1 billion in paper losses at one point this month. However, the impact was less severe than in 2021, with a smaller proportion of GameStop and AMC shares being shorted.

Companies Capitalize and Future Prospects

AMC leveraged the rally to improve its financial position by reducing debt and diluting shareholders through a fundraising deal. GameStop and other companies did not have similar arrangements but may consider such strategies in the future. The meme stock phenomenon's sustainability remains uncertain, with factors like the end of pandemic stimulus checks and higher interest rates changing the investment landscape. The future of meme stocks and related phenomena, such as meme coins, will likely depend on their ability to capture retail investors' attention amidst changing market conditions.

Management Quotes

  • Josh Weismer, head of US equity capital markets at Mizuho Americas:

    "Access a lot of capital in short time."