The return of meme chaos is one of the biggest trends on Wall Street. The re-emergence of Reddit’s great guru, Keith Gill, has triggered triple-digit increases in GameStop (and other stocks) with simple textless tweets. In that sense, after two major bullish ‘attacks’ in the last 30 days linked to this forum user, Morgan Stanley itself would be preparing to take action, regardless of any regulatory or legal action.
According to WSJ, the American firm is preparing to expel Guill from its platform, E*Trade, through which he operates to profit from ‘meme stocks’. The firm is concerned that his actions may constitute market manipulation and that it may be done through its system. This is why they are considering expelling him, especially after he posted screenshots of his own E*Trade account last Monday showing his shares and options in GameStop and his recent profits.
As the user publicly disclosed, he has made 9.3 million in his recent operations with GameStop and still holds shares and call options worth $181 million. The latter has been the key event. The screenshot (taken on Sunday, June 2) shows five million shares purchased at $21.27 each and 120,000 call options for $65.7 million. These options expire on June 21 and would allow him to buy these stocks at $20 per share regardless of any potential increases.
This caused a jump of up to 110% in the stock price. However, the influencer’s ‘power’ to make certain stocks dance goes beyond the picture of his portfolio, and even simple memes without any text have made not only GameStop vibrate, but also stocks like AMC and BlackBerry, traditional targets of retail investors. An example of this is his own at the beginning of May, which also resulted in triple-digit increases and only required a meme showing that it was time to get serious.
WSJ insists that this power to inflate a stock is worrying within Morgan Stanley and they believe that he may use it for his own benefit. The doubt within the organization is whether this is a case of market manipulation or if the ability to rally an army of forum users to support a stock is a risk that should already be considered inherent in retail madness. So far, the firm has not made a decision, but is closely studying the phenomenon and preparing for immediate expulsion when they have clarity.
The SEC itself is also concerned about the return of this phenomenon. The U.S. Securities and Exchange Commission is also reviewing Keith Gill’s transactions to determine accountability for his social media posts. However, according to WSJ, these investigations are still at a very preliminary stage and can only be understood as internal discussions about the ‘Roaring Kitty’ phenomenon.
Three years ago, there were already doubts about whether the ‘meme guru’ would have to face criminal responsibility for this type of practice. In fact, Gill had to testify before the U.S. Congress. During his testimony, he defended that he “did not seek for anyone to buy or sell stocks for his own benefit and had no relationship with any hedge funds.”
For now, meme stocks have found some calm. Despite having soared 100%, GameStop eased its gains to 21% yesterday and is only up 1% in premarket trading. AMC also eased its advances to 11% and is preparing for a day of declines. In any case, it remains to be seen if ‘the roaring kitty’ has launched its last major offensive or if the second ’round’ of the meme revolution has only just begun.
