Meme Stock GameStop Slumps on Lawsuit News

Meme Stock GameStop Slumps on Lawsuit News

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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 at insurance company MassMutual who rose to online stardom in 2021 when he declared himself a fan of brick-and-mortar retailer GameStop.

Gill was the target of a class action lawsuit over his recent social media posts about the company. On Monday, the plaintiff abruptly dropped the lawsuit.

The lawsuit, filed Friday by GameStop investors in federal court in Brooklyn, New York, alleged that Gill made “millions of dollars” from his social media posts between May 13 and June 13, causing GameStop’s stock to soar.

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 posted a cryptic message on social media platform X on May 12, which was interpreted as a positive signal for GameStop.

He had not posted anything on social media for the past three years.

GameStop shares tripled over the next two days, but were largely back to their previous levels by May 24.

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

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

The log also reported that the Massachusetts Securities Division was investigating Gill’s actions.

‘Celebrity Status’

“The department assesses all activities of both registered and unregistered persons that could have a negative impact on the market,” the agency said in a statement on Monday.

“The defendant continues to enjoy celebrity status and has an audience of millions through his social media accounts,” Radev’s complaint said.

“Therefore, defendant was fully aware that he could manipulate the market for GameStop securities, as well as the benefits he could derive from doing so.”

Gill’s actions sent GameStop’s stock price soaring more than 1,700 percent in January 2021, largely driven by small retail investors. This led to significant losses for large hedge funds that had been heavily shorting the troubled retailer.

Gill said in a securities filing Monday that he owns a 6.6 percent stake in online pet food and products retailer Chewy.

The company’s shares rose in early trading but closed down 6.61 percent.

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