Meme Stock GameStop Sinks On Lawsuit News

Shares in meme stock GameStop closed down 5.5 percent on Monday as investors reacted to news that celebrity investor Keith Gill faced investigations and a class-action lawsuit that was later dismissed.

Gill, known online as “Roaring Kitty”, is a former financial analyst with insurance firm MassMutual who became an online star in 2021 as he proclaimed himself a fan of bricks-and-mortar retailer GameStop.

Gill was targeted by a class-action lawsuit over his recent social media posts around the company before the suit was abruptly dropped by the plaintiff on Monday.

The lawsuit filed in Brooklyn, New York federal court on Friday by GameStop investors alleged that Gill gained “millions of dollars” from his social media posts between 13 May and 13 June, which caused GameStop shares to rise dramatically.

Stock volatility

His actions caused other investors to lose money, said the investors, led by Martin Radev, who lives in the Las Vegas area.

Gill on 12 May posted a cryptic message on social media platform X that was interpreted as a bullish signal for GameStop.

He had not posted to social media in the preceding three years.

Shares in GameStop more than tripled over the following two days, but returned largely to their previous levels by 24 May.

On 2 June Gill disclosed on social media that he owned 5 million shares in GameStop shares and 120,000 call options, and on 13 June disclosed he had exercised the call options but owned 9 million shares.

On 3 June the Wall Street Journal wrote about the timing of Gill’s options trades and said his brokerage platform E*Trade considered banning him from the platform.

The Journal also reported that the Massachusetts Securities Division was examining Gill’s actions.

‘Celebrity status’

“The Division reviews all activities by both registered and unregistered individuals that could negatively impact the market,” the agency said in a statement on Monday.

“Defendant still enjoys celebrity status and commands a following of millions through his social media accounts,” Radev’s complaint said.

“Accordingly, Defendant was well aware of his ability to manipulate the market for GameStop securities, as well as the benefits he could reap.”

Gill’s actions contributed to rises of more than 1,700 percent in GameStop’s share price in January 2021, mostly fuelled by small individual investors, which caused steep losses for large hedge funds that were heavily shorting the troubled retailer.

Gill revealed on Monday in a securities filing that he owned a 6.6 percent stake in online pet food and product retailer Chewy.

Shares in the company spiked in early trading before closing down 6.61 percent.