Wall Street takes a firm stance as 'Roaring Kitty' makes another appearance.
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Keith Gill, referred to as the "Roaring Kitty" meme stock investor, pushed the market into a frenzy by unveiling that he had bought almost $116 million worth of GameStop shares in a Reddit post. The publication also displayed a screenshot that revealed he bought 120,000 call options with a $20 strike price. This allows him to purchase 120,000 shares of GameStop at $20 per share by a specific expiration date. The GameStop stock closed at $46.55 per share on Wednesday, more than double the price locked in by those options. Another screenshot on Monday indicated that he earned $54 million in paper gains during a single trading session.
Gill shared a new image on Thursday, showing that he had not sold any of his shares since the Monday screenshot and that his holdings were now worth over $500 million. CNN could not independently confirm the authenticity of these screenshots.
Gill's reappearance on social media stirred the meme stock market, similar to the frenzy in 2021. Meme stocks are shares of companies with a devoted following, whose prices fluctuate frequently based on their popularity on social media platforms rather than their financial fundamentals.
The potential enormous value of his portfolio, along with the massive trading volume of GameStop and AMC Entertainment shares in recent weeks, raises concerns over whether his actions require regulatory investigation. Gill has not explicitly urged anyone to buy GameStop shares or claimed it's about to soar. He has only communicated by posting memes, GIFs, short video clips, and portfolio screenshots. It's uncertain if it's genuinely Gill behind those posts.
Wall Street, meanwhile, is starting to take notice. The Wall Street Journal reported on Monday that E*Trade, from where the screenshots seem to originate, is considering removing Gill. The Journal also revealed that Gill acquired a significant volume of GameStop options before he returned to posting on r/WallStreetBets in May after a hiatus of three years.
Jay Woods, chief global strategist at Freedom Capital Markets, said Gill's actions could be considered unethical but not criminal, given there was no explicit endorsement to purchase the stock.
Morgan Stanley, which possesses E*Trade, declined to comment for this story. Gill did not respond to requests for comment.
While Gill is not the first trader to spark copycats, others like Warren Buffet have gained similar influence: Berkshire Hathaway, where Buffet is CEO, disclosed a $6.7 billion stake in Chubb in May, causing the insurance firm's stock to rise. However, since that disclosure, Chubb shares have increased by just 4%. GameStop and AMC Entertainment, on the other hand, have skipped up by 167% and 99% respectively, following Gill's return to social media.
"Would I compare Keith Gill to Warren Buffet? No, but [Gill's] influence is extremely comparable. People want to replicate his success," said Woods.
The Securities and Exchange Commission (SEC) is examining GameStop call options trading activity around the time of Gill's social media posts as questions arise about whether his trading activity could be considered manipulation, according to the Journal. An SEC spokesperson informed CNN they "do not comment on the existence or non-existence of a possible investigation."
It's unknown if any regulatory action might counteract Gill's dedicated supporters or inspire them even more. Traders who trigger the 2021 meme stock craze emphasized a narrative of the underdog Main Street defeating powerful Wall Street: Retail investors boosted the shares of GameStop and other meme stocks, inflicting significant losses on hedge funds betting on the assumption their prices would drop. Any regulatory action against Gill at this time could promote a similar narrative.
In a surprising move, GameStop scheduled its first-quarter earnings for Friday instead of the initially planned Tuesday. The video game retailer reported a loss of $32.3 million, slightly better than the $50.5 million loss the previous year. First-quarter sales amounted to $0.9 billion, down from $1.2 billion the year before.
GameStop could be trying to preempt a livestream on the Roaring Kitty YouTube channel scheduled at 12 pm ET on Friday. Market watchers won't just be tuning in for amusement but also for potential clues about Gill's future moves and their possible consequences for trading regulations.
"There are implications, as people want to know what are the boundaries of what can and can't be done online," said Woods. "These market movements are not conventional."
The decision will bring a bit of ease to businesses and individuals, who have been struggling financially due to the rapid increase in interest rates since late 2021.
However, the European Central Bank warned that the battle to control price hikes isn't entirely resolved yet and they haven't fully committed to further rate reductions.
"Despite the advancements over recent quarters, domestic price pressures remain strong as wage growth is high, and inflation will probably stay above target for a long time," the central bank said in a statement.
Speaking to reporters, ECB President Christine Lagarde (wearing a necklace with the words "In charge") stressed that the central bank will stick to "a data-dependent and meeting-by-meeting approach."
"We are not precommitting to a specific rate path," she added.
For more details, check this out.
Microsoft's AI transaction under investigation by the FTC
The Federal Trade Commission is looking into a recent Microsoft deal with artificial intelligence firm Inflection, according to a person with knowledge of the situation, as US antitrust authorities have intensified their examination of the booming AI sector.
The investigation comes as antitrust officials from the FTC and the Department of Justice are on the verge of reaching a deal on how to jointly supervise AI behemoths such as Microsoft, Google, Nvidia, and OpenAI, two sources said.
That agreement, which is still being finalized, would make the Department of Justice responsible for overseeing Nvidia, while the FTC would pursue investigations into Microsoft and OpenAI, the people said.
Any investigations would look into whether these companies have exploited their powerful positions in the AI space to damage competition.
The FTC inquiry into Microsoft centers on whether the company's acquisition of Inflection was reported to the government, one of the sources claimed.
In March, Microsoft revealed that it had recruited Inflection's co-founders and some of their staff to head its Copilot program, and Inflection stated that its AI model would be hosted on Microsoft's cloud platform. As part of this agreement, Microsoft was said to have given $650 million to Inflection.
Microsoft, Inflection, Google, and OpenAI declined to respond to a request for comment. Nvidia didn't answer either.
More information can be found here.
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The Wall Street Journal reported that regulatory bodies might be investigating the actions of memorable meme stock investor Keith Gill, as his significant investments in GameStop and AMC Entertainment shares have caused substantial market movements. These actions, along with the high trading volume of these stocks, have raised concerns about potential market manipulation.
Given the influence of individuals like Gill on the stock market, traditional investment firms like Morgan Stanley are also keeping a close eye on such situations. For instance, Morgan Stanley saw the impact of Warren Buffet's investment in Chubb, leading to a significant increase in Chubb's stock price, albeit a more modest one compared to GameStop and AMC Entertainment.
