Unraveling the GameStop Phenomenon Unraveling the GameStop Phenomenon

By: Alex Freidmen

No matter which stance you took during the frenzied meme stock uprising of 2021, the market resembled the untamed expanse of the Wild West.

Among the pack, GameStop (GME) stood out as a mighty titan, unleashing chaos in the market through a short squeeze of monumental proportions.

Of course, other meme stocks like AMC Entertainment (AMC) also metamorphosed into a nightmare for short-sellers, triggering drastic price fluctuations.

And as the wheel turns, here they are again. Let’s delve deeper into this craze.

The Return of Roaring Kitty

Roaring Kitty, also known as Keith Gill, emerged as a central figure in the initial 2021 meme frenzy, catalyzing a movement that spotlighted the vulnerability of short sellers.

An epic short squeeze unfolded in GameStop shares, cascading into other heavily-shorted stocks like AMC Entertainment, inflicting anguish on short sellers.

The fervor waned over time until ‘Roaring Kitty’ resurfaced via a social media post not long ago, breaking years of silence. Meme-stock enthusiasts heeded the call, sending GME shares into a whirlwind of turbulence.

Assessment of GameStop’s Current Position

In its latest quarterly report, GameStop unveiled a significant decline in sales compared to the previous year. Shares came under pressure post-announcement, with GME also revealing a $75 million at-the-market offering.

Zacks Investment Research
Image Source: Zacks Investment Research

The company’s outlook has veered downward, presently holding a Zacks Rank #5 (Strong Sell). The recent market activity, fueled by a short squeeze, stands in stark contrast to the company’s current earnings prognosis.

Parting Reflections

As stocks heavily targeted by short-sellers ascend, a grueling cycle kicks off for the shorts, who find themselves compelled to repurchase the borrowed shares to cover their positions. This scenario spells substantial losses for shorts unable to meet their obligations, while traders savor the rollercoaster ride.

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This precise narrative unfolded in 2021 with meme stocks like GameStop (GME) and AMC Entertainment (AMC).

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