The leader of the short squeeze frenzy is back, with a single post causing Wall Street to go crazy and triggering a "circuit breaker" replay!

From: Jins Data

GameStop Corp.'s stock price surged on Monday, attracting attention. The reason is that people speculate that the legendary retail investor Keith Gill will return to social media. He previously drove the meme stock frenzy in 2021 under the name "Roaring Kitty".

Gill's account has been dormant for a long time. In 2021, he rallied day traders on Reddit to squeeze GameStop's short sellers, gaining fame in the process. A post from this account on X on Monday showed a man leaning forward, holding something that looks like a game controller, leading some traders to believe that Gill is about to take action again. The post attracted over 12 million views within a few hours of being published. At 11 a.m. New York time on Monday, Gill posted a video clip on X again, saying, "Well, I'll do it myself."

The response to Gill's initial post echoes the frenzy of 2021, with discussions on Reddit's WallStreetBets and StockTwits sparking buying among retail traders. GameStop's trading volume on Monday exceeded 175 million shares, nearly 30 times the average volume for a year. In the first 90 minutes of trading, the stock halted nine times due to volatility. GameStop's stock price on Monday rose by as much as 119%, closing at $30.45, up 74%.

Peter Atwater, President of Financial Insights and Adjunct Professor at William & Mary and the University of Delaware, said, "His ability to attract a group of people indicates that these people have regained the feeling of FOMO (fear of missing out) and YOLO (you only live once). When people invest in something purely speculative, their confidence is very high, and this is one way it manifests."

Prior to Monday's sharp rise, GameStop had risen for three consecutive weeks. As of the close of trading last Friday, the stock price had surged by 68%, marking the longest continuous rise for GameStop this year. In January 2021, the company's stock price soared over 2000%, bringing the meme stock frenzy into the broader public eye. After adjusting for stock splits, the stock reached a peak of $86.88 at the end of that month, followed by a drop of about 88% over the next three weeks. From the peak of the so-called "Reddit Raiders" in January 2021, the stock price has fallen by nearly three-quarters. To recover all losses, the stock price would need to increase more than four times from Monday's level It is worth noting that, according to the data from the financial analysis company S3 Partners, the short interest ratio of tradable shares has been maintained at around 24% for the stock. This is already quite high for a regular company, but it is still far from the levels seen before the frenzy in 2021 (when around 140% of available shares were shorted). During the first surge three years ago, GameStop soared over 1000% in just a few days as retail traders on Reddit's Wall Street Bets forum clashed with Wall Street big shots who were shorting the stock. The "Reddit Raiders" once had ample time and cash due to stimulating policies and work arrangements during the pandemic, but now most have returned to work, facing higher interest rates. Some joined the frenzy late and are still facing losses despite recent price surges. Professional short sellers have mostly given up attacking companies with relatively low float sizes, fearing the power of social media to incite squeezes.

With no clear catalyst driving the recent uptrend, GameStop's volatility has once again made retail investors the main driving force of demand. According to Vanda Research data chief Giacomo Pierantoni, total inflows last week amounted to $12 million. Pierantoni added, "The surge in retail activity acts as a contrarian signal, prompting institutional investors to quickly short the stock after these retail-driven rebounds."

Data compiled by foreign media shows that most on Wall Street have avoided analyzing the stock in recent years, with only three analysts covering it. Two recommended selling, one had a hold rating, and none advised buying. Analysts have long warned that GameStop's market cap of $9.3 billion is detached from its fundamental value. The company's net income for 2023 is only $6.7 million, resulting in a price-to-earnings ratio of over 1000 times. For comparison, market darling Nvidia has a P/E ratio of around 74 times.

Michael Pachter of Wedbush is one of the most skeptical voices on GameStop, stating, "I don't think they have enough data to sustain this situation, nor do I think they have the determination Gabe Plotkin showed three years ago, so as the fundamentals continue to deteriorate, this situation is likely to disappear." Gabe Plotkin is the manager of the hedge fund Melvin Capital, which suffered huge losses from shorting GameStop that year.

Options activity for GameStop has surged this month, but it is far from the levels seen in 2021. Open contracts for call options reached 588,205, the highest point this year, with last Friday's call options trading volume at 293,402, nearly three times the 20-day average. Around 700,000 contracts changed hands on Monday, more than four times the average level of the past month. However, during the peak of the 2021 Meme stock frenzy, millions of contracts were traded in a single trading session The most active day of the year - January 22 saw 8.5 million contracts change hands.

GameStop's stock price has dropped by over 60% since its peak in 2021. Another stock favored by retail investors, AMC Entertainment Holdings Inc., has dropped by over 99%. The meme stock frenzy of 2021 disrupted the U.S. stock market and taught some Wall Street professionals a lesson. However, after the bear market in 2022, this frenzy did not end well. Data compiled by JP Morgan in 2022 shows that the YOLO crowd who made money during the meme stock craze in 2021 have lost it all.

Although Monday's activities by this group have reignited memories of 2021, it has not reached that level yet. Estimates from Bloomberg Intelligence show that in the first quarter of 2021, retail traders' stock and ETF trading orders accounted for 24% of the total market trading volume, slightly higher than 17% in the first quarter of 2024