NEW YORK (AP) — A key player in the meme stock craze that began during the pandemic continues to wield a powerful influence over the movement of stocks at major U.S. corporations.
Almost four months later revealing a massive pin at online pet supply retailer Chewy, Keith Gill, aka Roaring Kitty, has liquidated all of his holdings in the company.
Shares fell overnight and traded up 1% on Wednesday.
Filings with the US Securities and Exchange Commission in July revealed that Gill had bought a 6.6% stake in the company after hinting at investments using pictures of dogs on social media platform X.
Gill became widely known in 2021 when he gathered retail investors GameStop. At the time, the video game retailer was struggling to survive — and big Wall Street hedge funds and big investors were betting against it or shorting its stock. But Gill and those who agreed with him changed GameStop’s trajectory by buying thousands of shares in the face of almost all accepted metrics that told investors the company was in serious trouble.
GameStop and Chewy have a common bond in Ryan Cohen. He founded Chewy in 2011 and stepped down as CEO in 2018. Gill saw in Cohen the potential to save GameStop, where he is CEO.
Other meme shares have been born since then, one of the most popular Trump Media & Technology Group Corp.
Trump Media this week surpassed the market value of Elon Musk’s social media platform X, both because that company’s value under Musk has collapsed, and because extremely volatile trading at Trump Media, which uses the ticker “DJT.”
Meme stocks were a novelty during the pandemic, but they’ve become a reality today, like it or not, rising and falling on little else but investor momentum and enthusiasm. Trump Media shares have more than doubled in 2024, although the company’s losses grow exponentially each year and its debt continues to mount.
Why is Chewy’s stock under pressure?
In a filing late Tuesday with US regulators, Gill revealed that he had liquidated his entire stake in Chewy, more than 9 million shares at one point, which had made him the company’s third-largest shareholder.
As with Gill’s other investments, he had dropped possible hints at X. In early September, he posted an image from the Toy Story franchise of a child dropping a toy with a dog’s face on it. superimposed on the head. Chewy uses dogs in many of its marketing materials.
Gill has not posted on the account since then.
How is the Chewy company doing?
In its most recent quarter, Chewy topped Wall Street’s earnings expectations and its revenue rose 2.6%. The stock is up almost 13% this year, which is better than the Dow Jones Industrial Average but well below the S&P 500’s year-to-date gains.
Industry analysts have raised their forecasts for Chewy’s earnings, and most see sales growth accelerating next year.
How has the environment for meme shares changed?
Meme stock companies have more shares trading on the market than in 2021, which could reduce the chances of what is called a “short squeeze.”
A short squeeze is a relatively rare event that can bring amazing profits to people riding the wave. When investors bet that a stock’s price will decrease in the future, they “short” it by borrowing shares and selling them. Later, if the price really falls, short sellers can buy the shares, return the borrowed shares and pocket the difference.
GameStop in March had roughly 305.9 million shares of its stock trading on the market, more than four times the number of shares it had in March 2021. That means it’s harder to move stocks like GameStop on momentum alone.
Such a short squeeze likely contributed to GameStop’s exciting climb in 2021, but SEC staff said it was a small part of the overall buying and that GameStop stock remained high even after the short sellers exited the market. their trade.
What are the risks of membership?
If you want to take a chance on meme stocks like Trump Media, you have to sit back and hope others share your enthusiasm.
Shares jumped 4% on Monday, 8% on Tuesday, and then fell more than 20% on Wednesday.
The stock is still bullish this week and if that holds, this gain would make it a six-week winning streak. However, during a seven-week stretch from late July to early September, the stock fell every week.
That said, shares in Trump Media are up 130% this year, rising and falling with the ups and downs of the former president’s campaign, but few industry analysts see a reason, based on economic fundamentals, to risk the investment. . .