GameStop & Roaring Kitty's Return 🐱
Plus After Earnings (From Morning Brew ☕️) with ServiceNow ($NOW) and Affirm ($AFRM)
We live in a world where an online personality named Roaring Kitty can tweet a meme that sparks an unprecedented surge of global liquidity, boosting GameStop's market cap by 178%, or $9.5 billion, between May 12th and May 14th. We should let that sink in…
The Kitty is back, reminding us that few individuals have ever wielded such a powerful outside influence over a single stock or the financial news media—especially through memes. Over five days, Roaring Kitty's 104 meme posts on X generated over 200 million impressions, creating a halo effect around the stock and driving over 4 billion potential impressions for the GME ticker across X, YouTube, and Reddit.
While most public companies may not envy GameStop's situation of having an internet personality from YouTube and Reddit significantly influence liquidity and stock price, every Investor Relations team should take note. The close correlation between digital impressions, Google search queries, and GameStop's stock price suggests a need for IR strategies suited for a highly networked, digitally connected world.
The IR community often asks, "What metrics should we use to measure our effectiveness when we don’t control the company’s overall performance or investor reactions to earnings?" Last week’s events underscore the importance of implementing the tools to measure and increase the digital reach of IR messaging, engaging digitally with shareholders, and promoting leadership within digital shareholder communities.
Stakeholder Labs develops modern IR programs that are designed to seed positive digital channel and social media sentiment, and amplify stock price momentum.
After 'Roaring Kitty' rally, GameStop, 'meme stocks' still puzzle market experts (UPI)
GameStop Stock Surge: GameStop stock surged by 74% last week, driven by the return of Keith Gill, known as "Roaring Kitty," on social media. This surge resulted in estimated losses of $1 billion for short sellers, reminiscent of the "meme stock" frenzy of early 2021.
Expert Analysis: Stephen Foerster from Western University's Ivey Business School and Jay Ritter from the University of Florida's Warrington College of Business commented on the puzzling nature of the rally. Significant trading volumes were noted, with about 3% of shares traded daily, compared to the average company's less than 1%. Foerster emphasized the cautionary tale for investors taking large short positions, while Ritter highlighted the impact of coordinated retail trading.
Impact on Other Stocks: AMC, another meme stock, experienced a dramatic rise, increasing from $2.91 to $6.85 per share, a more than 235% increase. This highlights the continued volatility and influence of retail investors on specific stocks. Institutional investors might begin monitoring social media channels like Reddit's r/WallStreetBets more closely as a result.
Influence of Prominent Individuals: Key figures like Warren Buffet have long impacted market activity, as noted by Foerster. Ritter pointed out that stocks can fluctuate based on news cycles and actions of prominent individuals, such as Donald Trump's newly-public Trump Media Inc. Despite having annual sales of about $4 million and substantial losses, Trump Media's valuation is around $8 billion, illustrating how meme stocks like GameStop, AMC, and Trump Media can see prices disconnected from their fundamentals.
The Resurgence of Roaring Kitty (Context Analytics Blog)
Roaring Kitty's Influence: Roaring Kitty's recent post reignited interest in GameStop and AMC stocks, showcasing his continued influence over stock market movements through social media.
Predictive Analytics: Context Analytics' Social Sentiment S-Score and S-Volume tools effectively predicted significant price surges in GameStop and AMC before they occurred.
Real-Time Sentiment Tracking: On May 12th and 13th, S-Scores for GameStop surpassed critical thresholds, indicating very positive to extremely positive sentiment, which preceded substantial price increases.
Market Implications: The case study demonstrates the power of social sentiment analytics in anticipating market movements, emphasizing the growing impact of social media on financial markets.
Battle of the meme stocks: How AMC bested GameStop (Axios)
Roaring Kitty's Influence: Keith "Roaring Kitty" Gill's tweet on Sunday sparked an immediate spike in GameStop's stock, which in turn boosted AMC's shares due to their interconnected meme-stock dynamics.
AMC's Strategic Timing: AMC was already in the process of selling shares to raise money when Roaring Kitty tweeted. The banks handling this leveraged the spike to close the deal at higher stock prices, strengthening AMC's financial position.
GameStop's Delayed Response: GameStop announced its plan to sell 45 million new shares on Friday, much later than AMC. This delay led to a stock slump, as the market anticipated a large influx of shares and potential selling pressure from traders.
Market Outcomes: By the end of the week, AMC's share price had risen significantly, settling at a 50% premium from where it started. In contrast, GameStop's share price saw a smaller increase, hindered by its late announcement and lack of further engagement from Roaring Kitty.
Finfluencers and Other Tech Disruptions - Implications for Corporate Law (Akshaya Kamalnath - ANU College of Law)
Rise of Finfluencers and Retail Investors: The significant rise of finfluencers, particularly in the context of the increased participation of retail investors driven by social media platforms like YouTube, Instagram, and Reddit. The COVID-19 pandemic and the ease of using investing apps have accelerated this trend, making it easy for retail investors to engage in the stock market.
Impact on Corporate Governance: Finfluencers have changed the dynamic between companies and investors. They can influence large groups of retail investors, leading to coordinated actions such as the GameStop episode. This phenomenon, termed "Hashtag Capitalism," illustrates how social media campaigns and finfluencers can drive corporate decisions and market behavior.
Regulatory Challenges and Responses: The regulatory challenges posed by finfluencers, particularly regarding transparency, accountability, and conflicts of interest. Different jurisdictions have responded in various ways. For example, the Australian Securities and Investments Commission (ASIC) has issued clear guidelines and enforced actions against non-compliant finfluencers, while India's Securities and Exchange Board (SEBI) is considering measures to ensure that finfluencers adhere to regulatory standards.
Educational and Coordinative Role: Finfluencers play a crucial role in financial education and inclusion, especially in markets like India and South Korea. They provide accessible financial advice and content in local languages, reaching audiences that traditional financial services might not. This educational aspect is essential for enhancing financial literacy and inclusion among new and existing retail investors.
CEO Influencers (Ted Merz / Surface Area Newsletter)
Emergence of Direct-to-Stakeholder (DTS) Communication: A growing trend among CEOs is to use social media, particularly Instagram-style videos, to connect directly with a younger and broader audience. This approach bypasses traditional PR and advertising channels, allowing executives to communicate more informally and authentically.
Notable Examples and Responses: Blackstone President Jonathan Gray and Meta's Mark Zuckerberg are pioneers of this new communication style. Gray's casual LinkedIn video explaining earnings received significant engagement, while Zuckerberg's videos announcing new products were praised for their raw and authentic feel. Shopify President Harley Finkelstein also adopted this method, earning positive feedback for modernizing executive communication.
Advantages of Self-Produced Content: Creating and posting their own content allows executives to tell their stories directly to stakeholders, including employees, and interact with commenters. This approach is particularly effective in reaching younger audiences who consume less traditional media and prefer more direct and informal communication.
Future of Executive Communication: Despite some CEOs claiming they lack time to post online, the increasing adoption of DTS-style communication by peers is likely to influence more executives to follow suit. The shift towards this new style highlights the importance of accessibility, authenticity, and engagement in modern executive communications.
This Week on After Earnings: Affirm ($AFRM)
In this episode of After Earnings, Austin Hankwitz speaks with Affirm CFO Michael Linford, exploring the company's innovative financial products, focusing on the Buy Now Pay Later space, and its commitment to consumer financial health. The discussion highlights Affirm's strategic partnerships, revenue streams, and response to competitive challenges, as well as its approach to leveraging AI for customer service enhancement. Linford also shares his personal journey to Affirm, underscoring the company's passion for offering transparent, flexible financial solutions that align with consumer success.
Last Week on After Earnings: ServiceNow ($NOW)
In this episode of After Earnings, Katie Perry and Austin Hankwitz sit down with ServiceNow CFO Gina Mastantuono. ServiceNow, a cloud-based workflow automation platform, enables enterprise organizations to improve operational efficiencies by streamlining and automating routine work tasks. Together, they discuss the company's impressive Q1 earnings, advancements in GenAI technology, and the importance of workplace cultural transparency that led them to be ranked #3 by Glassdoor as “Best Places to Work in 2024".