Riding the Wave: The Surge of Roaring Kitty and the GameStop Phenomenon

In an age where social media has come to dominate the financial markets, and where hedge funds and billionaire traders bowed their heads to the everyman and followed the so-called WSB to the tune of about a billion dollars, it seemed right that the saga would centre around a character as colourful as the names that have dominated the financial world in the past century. For it was Roaring Kitty who burst from the Reddit forums to the tippy-top of the financial world lexicon, helping to cause something of a frenzy in the markets unlike anything seen in a generation. Now it’s not just Roaring Kitty and his future with E*Trade we can look to examine in the wake of his GameStop (at that time) endorsements, nor his other recommendations but also whether others can have such an influence on markets post-WSB.

The Catalyst of the SURGE

The David-and-Goliath tale of Roaring Kitty (aka Keith Gill) started on the WallStreetBets subreddit, where his enthusiasm for GameStop inspired a buy movement that catapulted the stock not just higher but stratospherically so. His calls for traders to buy the stock on Reddit sent shares higher by more than 30 per cent on one glorious Monday.

E*Trade's Roaring Dilemma

The movement didn’t go unnoticed, and in December, after Roaring Kitty had become undeniably influential, E*Trade hired him as a brand ambassador. But that partnership now appears to be in jeopardy. Roaring Kitty’s social-media activities might be titillating for aspiring investors, but also have drawn the attention of regulators and lawmakers who are concerned about market manipulation. E*Trade has probably grown anxious at the legal and reputational consequences of what some view as manipulative behaviour, which is why the brokerage reportedly began internally debating whether or not to drop Roaring Kitty after Bloomberg started publication of a story on the matter.

The Eye of the Regulator

Lawmakers, including the Securities and Exchange Commission (SEC), have been keeping tabs. The run-up in GameStop’s stock price – driven largely on Reddit – has prompted demands that regulators step in and limit what some see as ‘illegal’ market manipulation by ‘unsophisticated’ investors. Roaring Kitty sits in a regulatory grey area, and this saga could usher in regulatory reform.

Social Media: The New Market Mover

Roaring Kitty’s story is emblematic of a larger shift in financial markets. Social media has become powerful enough to rally crowds of retail investors – and rotate their collective investment into stocks that rack up huge surges. The episode is seen by some as a powerful picture of how new platforms can tilt markets and the institutions that run them.

E*Trade and the Balance of Influence

For E*Trade, Roaring Kitty represented a new wave of potential – social media influencers gaining power in finance. But as E*Trade tries to decide whether it wants to continue this relationship, the firm faces the dilemma every brokerage house with similar clients is considering: how to capture the power of these influencers without putting themselves at risk of influencer-inspired volatility. E*Trade’s decision could well set a new precedent for the way brokerage firms relate to social media icons.

The Future of Finance and Social Media

As the Roaring Kitty saga evolves, it will be fascinating to watch how the constantly changing landscape of finance and social media play out, not only for financial markets, but also for how online influence affects those markets – and for how regulators react. There can be no doubt that the buying frenzy behind GME has created a debate that can lead to far-reaching changes in the way that social media influences finance.

Understanding SURGE

But in the context of the article, the word ‘surge’ is used to refer not only to the stock price of GameStop itself, but to the broader wave of change and influence that personalities such as Roaring Kitty have unleashed on the financial markets by using social media. The double meaning gets at both the movement in the short term of the stock market and in the longer term in the relationship between social media, public investing and market regulation.

In navigating this new financial world, Roaring Kitty and the GameStop drama remind us that power structures and flows are starting to be shaped by the digital world and those who inhabit it.

Jun 06, 2024
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