Keith Gill might be a billionaire on Friday. After surging 47.5% on Thursday, GameStop (GME) stock rose another 31.6% afterhours to end at $61.27 per share.
Keith Gill showed screenshots purporting to show that he owns 5 million shares of GME and 120,000 call options with a $20 strike price. If he were to exercise those options now, the retail trader who started the meme stock craze back in 2021 would be worth $1.042 billion at that afterhours price.
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While the broader market awaits Friday’s US Nonfarm Payrolls report for May, retail is entirely focused on a separate happening. That would be Gill, aka Roaring Kitty or Deepf*ckingValue on social media, providing evidence that he will rally the GME faithful by holding a YouTube livestream on Friday.
The livestream is scheduled for 12:00pm EST or 16:00 GMT based on a screenshot he shared. The internet is rife with speculation that Gill will use the livestream to exercise his call options. His options are worth somewhere close to $730 million based on the afterhours share price. His 5 million shares are worth somewhere in the vicinity of $300 million.
Some bystanders wonder if Gill has someone backing him in these enormous trades since they are so unusual for an individual to make. An E-Trade executive floated the possibility of closing Gill’s account on the platform several weeks ago, but the company has not done so since Gill came back from seclusion in mid-May.
RobinHood, another trading platform favored by younger traders, says it is prepared for high volatility on Friday.
With quarterly results scheduled to go live next Tuesday, June 11, company guidance expects a loss between $27 and $37 million. GameStop is expected to report sales of $882 million on a loss around 9 cents per share. Wedbush Securities has a $7 price target on the stock since same-store sales are expected to plunge from a year prior as gamers move to digital purchases.
Gamestop FAQs
GameStop is a retailer of video games and gaming merchandise through its approximately 4,400 branded stores worldwide. More than 2,900 of these locations are in the United States. The company was founded in Dallas, Texas, in 1984 as Babbage’s but changed its name to GameStop in 1999. The company had revenue of $5.93 billion in 2022 but has been falling over the past decade as physical game purchases have been declining in favor of digital downloads directly from hardware providers like Sony’s Playstation, Microsoft’s XBox, Nintendo and the Steam platform. The company trades under the GME symbol on the New York Stock Exchange.
In January of 2021, retail stock traders that organized on Reddit’s r/WallStreetBets forum realized that GameStop’s short ratio exceeded its float through the use of naked shorts. This information circulated until a group of traders decided to buy up the small amount of shares that were available. This caused the price to jump 1,500% in a famous short squeeze that month when short-sellers were forced to repurchase shares to close their short positions at higher and higher prices. Traders like Keith Gill walked away with millions of dollars in profits, while hedge funds like Melvin Capital and White Square Capital would eventually shutter due to extreme losses on their short positions. Traders on the Reddit forum made memes to proselytize their bets on GameStop, which helped the long trade proliferate. Later many of these same traders would glom onto new “meme stocks” like AMC Entertainment and Bed, Bath & Beyond.
In its most recent quarter, Q1 2023, GameStop saw revenue decline 10% YoY to $1.237 billion, which is pretty much par for the course. Much of the reduction in sales is due to declining game and collectible revenue, while hardware and merchandise sales have actually been increasing. GameStop has been making the most of the situation by cutting back on labor costs (SG&A) to the tune of $100 million YoY. These cost-cutting measures led GameStop to cut its net loss YoY by two-thirds to about $50 million. With more than $1 billion in cash on its balance sheet, so its backers think it has enough runway to become profitable again. Out of 12 recent analyst marks, the vast majority gave GME stock a “Hold” rating, while four analysts gave it a “Buy” or “Strong Buy”.
Ryan Cohen, the founder and former CEO of Chewy.com, made a large investment in GameStop in December 2020, preceding the stock’s epic short squeeze. Cohen became one of the most high-profile investors in the meme stock and later became Executive Chairman of the company. His tenure has resulted in a number of high-profile changes to management. A number of executives left GameStop once Cohen arrived, and he is said to have used his perch to install new executives from Chewy and Amazon in key positions. Cohen owns approximately 12% of the company.
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