I found it fascinating how their stocks’ price fell so sharply though I knew it was going to happen. For those who have been following the news, GameStop’s shares plunged by 25% recently. This happened just after Keith Gill, also known as Roaring Kitty, broke his silence on social media after three years.
Let me explain what happened and why I think it was inevitable. GameStop has always been a rollercoaster stock since the big short squeeze of 2021. We all remember how crazy that ride got, with retail investors pitted against hedge funds on Wall Street. Keith Gill was at the heart of this frenzy, inspiring many with his bullish stance on GameStop. Now fast forward to his recent comeback on social media; it stirred excitement in people. Everyone thought that there would be another surge in the price of these shares and for a second time it looked like this was about to happen again; this drove up the share value into $67 range per-share price resulting from the anticipation, but soon enough reality had its say.
The Q2 earnings report from GameStop was released earlier than expected, and the figures were not impressive. The company had net sales of $881.8 million which was less than analysts hoped for. It was expected to be between $900 million and $1.09 billion. However, the momentum could not be sustained for such sales numbers despite GameStop lowering its losses from last year’s 50.5 million dollars to 32.3 million dollars this quarter only.
The other reason is that Gamestop stated in a press release that it is going to issue 75 million new shares, which will dilute the value of existing ones, in case you don’t know what it means in financial terms. This move helps raise capital but tends to depress present share prices over short periods of time. The market reacted swiftly and harshly to this news as the stock price took a nosedive.
In my opinion, GameStop’s management is playing a long game here; I think they want money from selling these newly issued shares to revamp their business model completely so that they can forge ahead with their long-term objectives while others are even saying that this is bad news for some short-term investors as well as anyone who thinks otherwise or does not have a better understanding of stocks than me or any other illiterate.
Then there is Roaring Kitty’s part in all of this. Keith Gill's impact on the price of GameStop is a fact. His return to social media drove investors into a frenzy, many hoping he’d reignite another rally. But his latest livestream was somewhat more cautious than what we're used to from him. He didn’t make any sweeping predictions or calls for action like he normally would. To some extent, one can say that he played safe especially considering the kind of attention currently being given to him by regulators and other platforms such as E*Trade at Morgan Stanley who are said to be contemplating a ban due to market manipulation concerns.
Though Gill’s live stream may not have lived up to its anticipation, it is apparent that his mere presence still holds so much sway over the stock itself. Nevertheless, as we have seen this power can be a two-edged sword. The hype led to soaring stock prices only for reality to coincide with expectations resulting in a massive crash in prices. This situation reminds me about how dangerous it might be when investment becomes too dependent on one person’s influence especially within such an unstable market as the present one.