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GameStop and AMC shares surge for second day in ‘meme stock’ revival

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Shares in video game retailer GameStop and cinema group AMC Entertainment surged for a second consecutive session on Tuesday, extending a ferocious “meme stock” rally that was sparked this week by the re-emergence of a popular day trader.

GameStop and AMC jumped 63 per cent and 78 per cent, respectively, in early trading in New York, building on 73 per cent and 77 per cent gains on Monday. Trading in GameStop was briefly halted for volatility three times in the first 20 minutes of Tuesday trading.

The sharp moves higher come after bandanna-wearing trader Keith Gill — known as “Roaring Kitty” — who was at the heart of a rally driven by an army of retail traders during the pandemic, appeared to resurface on Sunday after a three-year hiatus from social media site X.

Eagle-eyed traders reacted with glee to the post, piling back into many of the meme stocks, including GameStop and AMC, whose prices hit dizzying highs in early 2021.

“Gamestop and AMC were the mascots, the posterchildren, of the [2020-2021] meme stock movement,” said Dhruv Chand Aggarwal, an assistant professor of law at Northwestern Pritzker School of Law, who last year co-authored a paper on the pandemic era “meme stock frenzy”.

“Could I have predicted the return of Roaring Kitty? Probably not. But I’m not that surprised that meme surges persist,” he added.

Trading volumes for GameStop and AMC on Monday were 15 times and 20 times their 20-day averages, according to Bloomberg data. GameStop now trades at more than 3,000 times its estimated earnings per share for the coming year.

Galvanised by Roaring Kitty and other social media celebrities, retail investors who in late 2020 were stuck at home under pandemic restrictions — but who were also flush with government stimulus cheques — banded together on sites such as Reddit’s wallstreetbets to take on hedge funds who were betting against the shares of struggling companies. 

Melvin Capital, which had a large short position in GameStop in late 2020, became the traders’ most high profile victim, caught out by a lightning rally that eventually wiped out half of its $13bn fund.

This week’s price action pales in comparison with the large inflows for GameStop and AMC more than three years ago.

Net inflows into GameStop and AMC on Monday hit $15.8mn and $37.5mn, according to VandaTrack, a data company that monitors retail investment trends. On January 27 2021, net inflows for the two stocks reached $87.5mn and $170mn, respectively.

“Do we think this is a repeat of 2021? No, and the chances we reach that stage are low,” said Marco Iachini, VandaTrack’s vice-president, who noted that institutional investors were also participating this week “in large numbers”.

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