NEW YORK (AP) — A key player in the meme stock frenzy that began during the pandemic continues to have a strong grip on the stock movements of major U.S. corporations.
After almost four months revealing a massive proportion in online pet retailer Chewy Keith Gill, aka Roaring Kitty, has liquidated his entire stake in the company.
Shares tumbled overnight and were down 1% on Wednesday.
A filing with the US Securities and Exchange Commission in July revealed that Gill acquired 6.6% of the company’s stock after hinting at investments using pictures of dogs on social media platform X.
Gill became widely known in 2021 when he gathered small 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 nearly every accepted metric that told investors the company was in serious trouble.
GameStop and Chewy have a common tie in Ryan Cohen. He founded Chewy in 2011 and stepped down as CEO in 2018. Gill saw the potential in Cohen to save GameStop, where he is CEO.
Since then, other shares of the meme have been created, one of the most famous beings Trump Media & Technology Group Corp.
Trump Media surpassed the market value of Elon Musk’s social media platform X this week, both because the company’s value has collapsed under Musk and because extremely volatile trading at Trump Media, which uses the symbol “DJT”.
Meme stocks were a novelty during the pandemic, but today they have become a reality, like it or not, rising and falling on nothing but the momentum and enthusiasm of investors. Trump Media stock has more than doubled in 2024, even as the company’s losses grow exponentially each year and its debt continues to grow.
Why is Chewy stock under pressure?
In a filing late Tuesday with U.S. regulators, Gill revealed that he had liquidated his entire stake in Chewy, more than 9 million shares at one point, making him the company’s third-largest shareholder.
As with other investments in Gill, he dropped potential hints on X. In early September, he posted an image from the movie series “Toy Story” where a child dropped a toy with a dog’s face on its head. Chewy uses dogs in many of its marketing materials.
Gill has not contributed to the account since.
How is Chewy doing?
In its most recent quarter, Chewy beat Wall Street earnings expectations, with sales rising 2.6%. The stock is up nearly 13% this year, better than the Dow Jones industrial average but well below the S&P 500’s year-to-date advance.
Industry analysts have raised their earnings projections for Chewy, and most see sales growth accelerating next year.
How has the meme stock landscape changed?
Meme stocks are trading more shares in the market than in 2021, which could reduce the chances of a so-called “short squeeze.”
A short squeeze is a relatively rare event that can bring staggering profits to people riding the wave. When investors bet that a stock’s price will fall in the future, they “short” it by borrowing the stock and selling it. Later, if the price actually falls, short sellers he can buy shares, return borrowed shares and keep the difference.
GameStop had roughly 305.9 million shares outstanding in March, more than four times the number of shares it had in March 2021. That means it’s harder to move a stock like GameStop on momentum alone.
Such a short squeeze likely contributed to GameStop’s exciting 2021 rally, but SEC staff said it was a small fraction of the total purchases and that GameStop stock remained high even after sellers briefly left their stores.
What are the risks involved?
If you want a chance at a meme like the Trump Media, you have to buckle down 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 it holds, this gain would make it a six-week winning streak. Yet during a seven-week stretch from late July to early September, the stock fell every week.
That said, Trump Media shares are up 130% this year and appear to rise and fall with the ups and downs of the former president’s campaign, but there are few analysts who see a reason to risk the investment based on economic fundamentals. .