'Roaring Kitty' could get kicked off E*Trade for GameStop stock manipulation

The Wall Street Journal, citing unnamed sources familiar with the matter, reports that E*Trade is weighing removing Keith Gill, the investor widely known by his social media persona “Roaring Kitty,” over concerns of stock manipulation stemming from purchases of GameStop $GME stock shortly before kicking off a renewed meme stock frenzy last month.

Gill gained national attention during the COVID-19 pandemic for his bullish analysis of GameStop on Reddit $RDDT, and drove the first short squeeze of the video game retailer’s stock in early 2021 — which saw its shares surge more than 1,000% in a matter of weeks.

Last month, he did it again when he posted a meme on X $TWTR that his followers interpreted as a sign to start buying up GameStop shares — and they did. Although the craze fizzled out within a few days, Roaring Kitty made himself heard on Sunday when he posted a screenshot of his portfolio to Reddit forum r/Superstonk showing that he still owned 5 million shares of the retailer worth almost $116 million as of Friday’s closing price of $23.14 per share.

GameStop stock surged more than 100%, before closing out Monday up 21%. Gill posted another screenshot of his portfolio late Monday, showing that he gained $78.6 million in just one trading day, mainly from the call options.

Gill goes by “DeepF———Value” on Reddit, and by Roaring Kitty on X and YouTube, where he has a combined roughly 2 million followers. He later posted a picture of the reverse card from the card game “Uno” on X.

E*Trade is worried that Gill is leveraging his power to send GameStop stock soaring and is potentially manipulating the stock for his own benefit, The Journal reports — but the firm is also concerned that removing Gill will draw unnecessary attention from his legion of followers. The trading platform’s employees reportedly saw that he had bought call options — which give a trader the right to buy the stock by a certain date at a stated price — before posting his first meme in three years on May 12. With some of those options expiring last week, Gill likely made a profit from the trades and the squeezed stock.

Morgan Stanley declined Quartz’s request for comment.

Shares of the video game retailer were down almost 3% in pre-market trading Tuesday.

GameStop’s rollercoaster month

GameStop said last month that it sold 45 million shares of common stock for approximately $933.4 million. It had disclosed that it would be carrying out an “at-the-market” equity offering, meaning that its newly issued shares were sold at market prices. At the time, GameStop warned that investors who purchase shares in the offering could lose a “significant portion” of their investments due to the stock’s “extreme price fluctuations.”

The company also disclosed in regulatory filings that it’s projecting quarterly sales to drop to $872-$892 million, down from $1.24 billion in the same quarter last year. GameStop also projected net losses between $27 million to $37 million for the quarter, an improvement from $50.5 million in losses a year earlier.