Will GameStop add $100 billion today?

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Caution must be ‘front and center’ as GameStop Corp. shares more than doubled after the Reddit account that drove the meme-stock mania of 2021 posted what appeared to be a $116 million position in the game retailer.

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This is the warning from Nigel Green, CEO of deVere Group, after GameStop shares rose as much as 105% in premarket trading on Monday.

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He says: “If those gains hold, the stock would add around $8 billion to its market capitalization.

“These super quick, super high, headline-grabbing figures are likely going to attract another huge wave of interest and, therefore, capital.

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“I would not be surprised if the stock added $100 billion by the end of Monday due to the frenzy.”

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Bloomberg reports: “The June 2 screenshot by Keith Gill, who goes by DeepF— Value on Reddit, shows five million shares bought at $21.27 apiece. It was the account’s first post in three years. The screenshot, which also included 120,000 call options worth $65.7 million due to expire on June 21, couldn’t be verified. The options would allow him to buy the stock at $20 a share.”

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Between 2020 and 2021, he became one of the main influencers who encouraged an army of day traders to heavily invest in GameStop, igniting the meme stock craze.

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Short sellers, whether individual investors or hedge funds, anticipate that the price of a particular stock will decrease. They borrow shares of this stock, sell them at the current price, and then repurchase them after the price drops, profiting from the difference.

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Last month, the deVere CEO said: “I think this frenzy is going to run all summer, with the likes of influencer Andrew Tate, among others, involved. Their power is immense and it’s going to be a rollercoaster.

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“It’s a revival of the trend of 2021 and 2022 last year. Back then, many individual investors – often young and inexperienced – got badly burned by the experience. Without doubt, investors will get burned by this frenzy too.

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“I would urge everyone to exercise maximum caution with meme stock trading that’s being fuelled by social media.

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“Of course, big, big money can be made by some.

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“But let’s be very clear: this is extremely speculative and valuations can be expected to be incredibly wild – in both directions.

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“To my mind, it’s more gambling than investing.

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“If you do want the thrill or novelty of chasing big gains, you really should ensure that you have a sound, diversified, long-term plan beforehand.”

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The original meme stock rally of 2021, also driven by Keith Gill, was fuelled by a surge of new retail traders entering the market, many of whom had additional liquidity from pandemic stimulus measures and historically low interest rates.

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Nigel Green concludes: “The eye-watering numbers might be tempting, but there are real risks involved.”