‘Roaring Kitty’ appears to have upped stake in GameStop, exited options

Noted investor Keith Gill, best known as “Roaring Kitty,” appears to have closed out his options position in GameStop, according to posts on his social media accounts on June 13. Gill then appears to have used the proceeds to raise his equity stake in the ailing video game retailer. The options sale netted Gill some cash and transformed a short-term stake into long-lived equity.

Here’s the approximate profit netted by Roaring Kitty on his options trade and the details on his new and enlarged ownership stake in GameStop stock.

The profit on Keith Gill’s GameStop trades

In early June, Gill revealed on social media that he had made a significant investment in GameStop, totaling about $181 million in value at the time.

It consisted of two parts:

• 5 million shares of GameStop stock purchased for $21.27, worth approximately $116 million at the time of the post.
• 120,000 June 2024 $20 call options purchased for about $5.68, worth nearly $66 million at the time of the post.

The options allowed Gill to purchase 12 million shares of GameStop stock at $20 per share by the June 21, 2024 expiration. Gill also had $29.4 million in cash in his account.

Gill closed his options position about a week before the contracts were set to expire, selling them outright or exercising them and receiving GameStop stock, or some combination of the two. He posted his account balance following the trade, which came to $268.45 million as of June 13, with a cost basis of $210.74 million on the GameStop stock position.

How much did Gill ultimately make on his options trade?

To figure Gill’s profit on the options, take this most recent cost basis and subtract the original cash of $29.4 million and the purchase price of the options, about $68.1 million. Then net out the original cost of five million shares, which were purchased at an average of $21.274.

That leaves a total of about $6.8 million in profit on the options, or a gain of about 10 percent on the $66 million basis. So in total, the sales price on the options was about $6.07 per contract. The options had been up hundreds of millions when GameStop was trading north of $45 per share.

Gill then increased his equity position, bringing that from 5 million shares of GameStop to 9,001,000 shares, as of June 13. His average price paid was about $23.41 per share, and he maintained $6.34 million in cash in the account.

Based on these figures, Gill will remain profitable on these recently announced stock and options transactions as long as the stock remains above about $21.94 per share.

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Why is ‘Roaring Kitty’ investing in GameStop?

Gill held a livestream on YouTube on June 7 that explained his rationale for investing in the troubled retailer. In a rambling and unleashed broadcast, Gill spoke for about an hour on his investment to an audience that numbered more than 600,000 at one point, while sipping a beer.

Gill said that his investment in GameStop is based on the belief that the company is preparing for a turnaround under new CEO Ryan Cohen, who became chief executive in September 2023. Cohen started Chewy, a specialty retailer, in 2011, and then sold the company to PetSmart in 2017.

GameStop has quickly taken advantage of the renewed interest in its stock, following the release of a few cryptic messages from Gill on social media in May and then the revelation of his stock and options positions in June. The company raised hundreds of millions of dollars by issuing new shares of stock, giving it extra breathing room after years of losses.

While Gill sounded personally upbeat on the future of GameStop, he used a significant portion of the livestream to emphasize the risks of investing in the stock and options. He also clarified that he was not working with other investors, such as someone providing additional capital.

Gill was the most vocal cheerleader behind the social media frenzy that helped push GameStop “to the moon” back in late 2020 and early 2021.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.