Transparency offensive or predictable rug-pull?
The cat shows its claws - Roaring Kitty presents his portfolio!
Image Source: Roaring Kitty YouTube Channel
What happened?
I recently wrote an article about a cryptic post from Roaring Kitty. Guess what? Shares of GameStop experienced a significant surge today (Monday) after a post by said Roaring Kitty. On Reddit it was suggested that he had acquired a substantial position in the company. Gill's post included a screenshot indicating he had purchased five million GameStop shares for a total of $116 million, averaging $21.27 per share. Additionally, the screenshot showed he held 120,000 call options worth $65.7 million, expiring on June 21. This propelled the stock price up by around 30% shortly after the New York market opened, peaking pre-market with an 80% rise.
Despite this volatility, Monday's pre-market activity showed there remains a significant interest in GameStop among retail investors.
GameStop shares, which at one point traded at over 2,300 times their estimated earnings per share for the coming year, added nearly $4 billion to the company's market value during early trading. The stock hit $38 per share before trading was temporarily halted, eventually settling with a 30% increase by the end of the session.
Market data from S&P Global indicated that approximately 15% of GameStop's outstanding shares were on loan as of Friday, a decrease from over 25% at the end of May, suggesting reduced short interest. In May, GameStop announced plans to sell up to 45 million new shares, raising $933.4 million. The company is expected to report a 25% year-on-year drop in net sales for the first quarter on June 11, according to preliminary results.
Gill's post also featured an image of a reverse card from the game UNO, symbolizing a potential turnaround for the stock. The post garnered 6.5 million views within twelve hours of its release. His actions have once again stirred significant online support, with social media tributes praising him as "one of the greatest traders of all time."
Image Source: Roaring Kitty’s “X” Profile
However, this popularity also harbors risks. Blind followers who are not necessarily aware of the actual risks run the risk of ending up in a classic rug pull.
A short introduction to classic rug pulls
A stock rug pull occurs when insiders or influential investors of a company heavily promote its stock to inflate the price artificially, then suddenly sell off their shares at the peak, causing the stock price to crash and leaving unsuspecting investors with significant losses.
My two cents
The upcoming first-quarter results on June 11 and the fresh input from Roaring Kitty increases awareness of the share immensely. This coupled with an almost unruly crowd of retail investors, disciples and r/wallstreetbets users can be the ideal stage for a lamplight rug pull in the worst case scenario. However, some brave investors are likely to earn themselves a golden nose.
Wow meow.
However, I don't want to imply that Roaring Kitty has any bad intentions. So far, I find him to be clever and, above all, highly entertaining!
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