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The GameStop rally fell flat this time around. Shares of the video game retailer sunk almost 25% on Thursday afternoon, after closing down roughly 18% on Wednesday. Fellow meme stock AMC also saw its shares dip almost 13% Thursday, after ending Wednesday down 20%.
The two companies saw massive boosts earlier this week following the apparent online return of investor Keith Gill, better known as “Roaring Kitty.” Gill made a cryptic post on X on Sunday that was interpreted by fans as a sign to begin trading GameStop stock again — and one day later, the company’s shares shot up, closing almost 75% higher. GameStop stock ended Tuesday another 60% higher. AMC and a handful of other stocks rallied on the tailwinds of the renewed meme stock frenzy.
Meme stocks are company shares that become wildly popular online and are hotly traded by investors, most of them individual rather than institutional, sending prices soaring regardless of the company’s actual performance. (They also pose a massive headache for hedge funds and other short-sellers, who make money by betting against stocks.)
But that excitement seemed to reach on inflection point on Wednesday, when shares of both companies began to slump.
This time around, things have looked a lot different than the rally spurred by Gill in early 2021. With people bored at home in the midst of the COVID-19 pandemic, Gill orchestrated the first short-squeeze of the video game retailer’s stock on social media platforms like Reddit and TikTok. GameStop saw its shares surge more than 1,000% in a matter of weeks.
After Gill’s three-year hiatus, fans were largely expecting a sustained GameStop rally reminiscent of the historic pandemic-era squeeze. Instead, the drop-off in meme stock shares happened in a matter of days.
This wasn’t a surprise to Dan Egan, head of behavioral finance at investment advisor Betterment, who predicted that the latest meme stock rally would be much shorter-lived than the last.