NEW YORK — A significant figure in the meme stock phenomenon that erupted during the pandemic continues to influence the share prices of major U.S. companies.
Just under four months after announcing a substantial investment in the online pet product retailer Chewy, known as Roaring Kitty, Keith Gill has completely divested his interests in the firm.
Following this revelation, Chewy’s shares fell slightly, down 1% in trading on Wednesday.
In July, filings with the U.S. Securities and Exchange Commission disclosed that Gill had taken a 6.6% stake in Chewy, which he hinted at through various dog-themed posts on the social platform X.
Gill rose to fame in 2021 when he mobilized retail investors to support GameStop, a company struggling for survival as major hedge funds were betting against it.
His actions and those of like-minded investors greatly altered GameStop’s trajectory, as they purchased thousands of shares despite overwhelming evidence suggesting the retailer was in dire circumstances.
Both GameStop and Chewy share a connection with Ryan Cohen, who founded Chewy in 2011 and left as CEO in 2018.
Gill believed Cohen had the potential to revitalize GameStop, where he currently leads as CEO.
Since the initial meme stock frenzy, new players have emerged, including the Trump Media & Technology Group Corp.
Recently, Trump Media exceeded the market value of Elon Musk’s social media platform X.
This shift is attributed to the declining valuation of X under Musk, coupled with the volatile trading activities surrounding Trump Media, which trades under the ticker symbol “DJT.”
Initially, meme stocks were a passing trend during the pandemic; however, they have become a fixture in the market, driven predominantly by investor enthusiasm and momentum.
In 2024, shares of Trump Media have more than doubled, despite the company’s growing losses and increasing debt levels.
What is leading to pressure on Chewy’s stock?
In a regulatory filing late Tuesday, Gill disclosed he had sold off his entire investment in Chewy, previously holding over 9 million shares, making him the third-largest stakeholder in the firm.
Like with his earlier maneuvers, Gill had been offering cryptic hints on X about his stake.
One of his posts from early September included an image connected to the “Toy Story” movies, featuring a child dropping a toy with a dog’s face overlaying it—a nod to Chewy’s frequent use of dogs in marketing campaigns.
Since that post, Gill has not made any updates on the platform.
How is Chewy performing financially?
In its latest financial quarter, Chewy reported earnings that surpassed Wall Street expectations, with revenue increasing by 2.6%.
The company’s shares have appreciated nearly 13% this year, outperforming the Dow Jones Industrial Average but lagging behind the gains seen in the S&P 500.
Analysts have been optimistic about Chewy’s profitability, raising projections for the coming year and anticipating accelerated sales growth.
How has the landscape for meme stocks evolved?
Since 2021, companies within the meme stock realm have experienced an increase in available shares for trading, potentially reducing the likelihood of a “short squeeze.”
A short squeeze occurs when a stock’s price rises sharply due to heavy short-selling, leading investors who bet against the stock to buy shares to cover their positions—causing prices to soar.
GameStop had approximately 305.9 million shares traded in March, a significant increase compared to 2021.
This surge in share availability makes it less feasible for stocks like GameStop to experience dramatic price shifts driven purely by market momentum.
Though a short squeeze played a role in GameStop’s explosive rise in 2021, the SEC found that such instances made up a small fraction of overall trading activity, and GameStop remained buoyant even after short sellers exited their positions.
What are the considerations for investors?
If you are contemplating investment in meme stocks such as Trump Media, be prepared for a volatile ride that hinges on the collective enthusiasm of investors.
This week, shares fluctuated sharply, with a 4% gain on Monday, followed by an 8% rise Tuesday, before plummeting over 20% by Wednesday.
Despite these changes, if the stock remains positive, it could mark the start of a six-week winning streak, contrasting with a previous stretch where it fell consistently over seven weeks from late July to early September.
Currently, Trump Media’s shares have surged 130% in 2024, moving in tandem with fluctuations in its campaign’s fortunes, yet few analysts recommend investing based on fundamental economic assessments.