Latest GameStop stock rally fueled by 'baseless speculation,' brokerage CEO says

By James Rogers

In meme-stock rallies such as GameStop's latest surge, 'baseless speculation is misunderstood as strategy,' says Dan Raju, CEO of cloud-based financial-services provider Tradier

The latest meme-stock rally, which sent shares of GameStop Corp. soaring again, has been fueled by "baseless speculation" and "speculative resonance," according to Dan Raju, the chief executive of cloud-based financial-services provider Tradier.

Shares of GameStop (GME) surged Monday after a post from influential trader Keith Gill, aka Roaring Kitty, appeared to show him holding a big stake in the videogame retailer. On Sunday, Gill posted a screenshot on Reddit that appeared to show holdings of 5 million GameStop shares with a value of $115.7 million, along with 120,000 June 21 $20 call options worth $65.7 million. The trader and analyst is also holding more than $29.2 million in cash, according to the screenshot.

MarketWatch could not verify the authenticity of the screenshot. Gill also made a cryptic post on X, formerly known as Twitter, posting a green "reverse" card from the card game Uno.

Related: Roaring Kitty's GameStop position worth over $386 million as of Monday morning

"What happens in meme rallies like the one we are seeing with GameStop is that baseless speculation is misunderstood as strategy by a few segments of retail investors," Raju told MarketWatch. "In these meme-centric social communities, 'speculative resonance' occurs."

He added: "First, the news of an impending frenzy feeds the frenzy itself. Mainstream media's coverage legitimizes the frenzy as a market event. When a few influencers announce that they have taken long positions in heavily shorted meme stocks, it initiates a short squeeze, causing the stock price to rise."

GameStop's stock was up 78.6% in premarket trading Monday before tumbling from its highs. Nonetheless, the stock ended the session up 21%. Shares of fellow meme stock AMC Entertainment Holdings Inc. (AMC) also climbed Monday and ended the session up 11.1%.

GameStop shares are down 1.5% in premarket trades Tuesday and AMC is down 1.9%.

Related: Shares of Faraday Future, SunPower, MicroCloud Hologram and other memes surge, lifted by another meme-stock revival

Last month, Gill's return to social media fueled a rally in shares of GameStop and AMC, as well as a number of other stocks. GameStop and AMC were at the heart of the original meme-stock rally in 2021, which saw Gill rise to prominence.

GameStop shares are up 59.7% in 2024, while AMC's stock is up down 21.4%. The S&P 500 index's SPX has gained 10.8% in the same period.

Gordon Gottsegen contributed.

-James Rogers

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06-04-24 0700ET

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