Chewy, the online pet food retailer, saw a surge in its stock price on Monday following the revelation that renowned investor Keith Gill, also known as “Roaring Kitty,” had acquired 9 million shares in the company. The purchase was disclosed in an SEC filing on July 1, revealing that Gill now owned approximately 6.6 percent of Chewy’s shares.
Although the exact purchase price was not disclosed in the filing, Gill’s stake is estimated to be worth around $248 million, based on Chewy’s stock price of $27.50. The stock had been trading between $26 and $30 per share in the previous week, with a notable spike to the mid-$30s on Thursday, coinciding with the time when Gill shared a cartoon image of a dog on his X account.
Gill gained prominence as a vocal supporter of the social media frenzy that fueled the meteoric rise of GameStop at the end of 2020 and the beginning of 2023.
Roaring Kitty’s Latest Investment in a Meme Stock
Gill’s acquisition of Chewy follows his recent purchase of GameStop, a struggling retailer that became a meme stock popular among traders on social media platforms. Gill had previously disclosed a significant position in GameStop, causing the stock price to soar. The company took advantage of the price surge to issue additional shares of its stock.
Both Chewy and GameStop have ties to executive Ryan Cohen, who founded Chewy and assumed the role of CEO at GameStop in September 2023.
It remains unclear whether Gill’s new investment in Chewy is in addition to his existing stake in GameStop, which was valued at over $180 million when he first announced it in early June. The stock experienced a rapid increase in value following the confirmation of Gill’s ownership.
While GameStop’s price has declined from its peak above $45 in recent weeks, it currently hovers around the estimated breakeven point of Gill’s GameStop trade at approximately $23.
Gill has not publicly shared his investment thesis for Chewy, as he did for GameStop during a livestream on YouTube in June. However, he expressed confidence in Chewy due to Cohen’s leadership and his belief that Cohen would lead the company to a successful turnaround.
Meme Stocks Pose High Risk for Investors
The volatility of GameStop’s stock serves as a cautionary tale on the allure and risks associated with meme stocks, which attract traders through social media hype but can be detrimental to long-term wealth building.
The fluctuation in meme stocks, fueled by online chatter that drives interest, presents opportunities for skilled traders to capitalize on price spikes and generate substantial profits quickly. However, this volatility also poses significant risks, as evidenced by the sharp decline in GameStop’s stock price, leaving some investors with substantial losses.
Individuals seeking quick gains from meme stocks may find themselves on the losing end, especially when competing against sophisticated algorithmic traders. Consistent profit-making in such a volatile environment is challenging, with active traders typically underperforming passive long-term investors.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Past performance of investment products does not guarantee future price appreciation.