• Reddit shares closed near record high on Tuesday after a two-day rally driven by meme stock frenzy
• The rally was sparked by the resurfacing of “Roaring Kitty” Keith Gill, who inspired the 2021 meme stock mania
• Shares of GameStop, AMC, and other meme stocks more than doubled in the past two days
Reddit shares popped on Tuesday, climbing for a second straight day after retail traders kicked off a buying frenzy of so-called “meme stocks.”
What Happened
The stock closed at $69.34, Reddit’s second-highest close since its IPO in March. The rally began Monday when Roaring Kitty (aka Keith Gill), the man who inspired meme stock mania in 2021, resurfaced online, sending shares of GameStop and AMC soaring.
Gill shared a picture on Reddit that showed a video gamer sitting forward on a chair. The image is often used by gamers to signal they’re taking the task seriously. As of Tuesday’s close, the post has been viewed more than 25 million times, according to Reddit.
Reddit’s Role
Reddit played a central role in the meme stock boom three years ago, largely due to the forum r/WallStreetBets where traders gather to share tips and in some cases band together to drive a stock up or down. GameStop mentions ballooned on WallStreetBets on Monday after Gill’s post.
The image and a series of other cryptic posts were enough to lift GameStop and AMC by more than 100% in the past two trading sessions. Other stocks that have been bunched in with the meme group rose, including BlackBerry, Koss, and SunPower.
Fundamentals vs Sentiment
Citizens JMP equity research analyst Andrew Boone told CNBC on Monday that he didn’t see any fundamental reason for Reddit’s rally. Still, he said an increase in user activity would help boost the company’s advertising business.
“At the end of the day, more users means more impressions, which means there are more ads for them to sell,” Boone said.
Neil Wilson, chief market analyst at Finalto, said in a note: “It looks like retail investors are becoming more bullish again and willing to take on more risk. There is no fundamental reason for the move as such – GME’s last earnings report was abysmal.”
The Reddit IPO
Reddit, founded 19 years ago, debuted on the New York Stock Exchange on March 21 at $34 a share and ran up as high as $65.11 on March 26. The stock then started selling off, falling as low as $39.17 in April before getting a boost from Reddit’s better-than-expected earnings report earlier this month.
