#ConsumerCorner: Roaring Kitty and the rise of influencers

The role of social media has undeniably transformed the investing landscape, providing retail investors with unprecedented access to information and community-driven insights. 

And the importance of influencers in driving those investors was reinforced this week, with the reemergence of Keith Gill, aka Roaring Kitty. 

For those who don’t know him, Roaring Kitty was one of the key players behind the short squeeze in 2021 on struggling US retailer GameStop that saw hedge funds lose billions by betting the company would collapse. 

Gill and an army of retail investors on social media platform Reddit wanted to rise up against the faceless hedge funds to create a “meme stock” that would leave Wall Street professionals with egg on their faces. The whole saga was even made into a Hollywood film called Dumb Money. 

But Roaring Kitty left the stage shortly after the surge died down as questions were being asked by politicians and regulators. He would be hauled before Congress for his role in the surge and has kept a low profile ever since. 

That was until this week where reports emerged of a screenshot he posted on Reddit, showing he has taken a new position in GameStop. 

The post purported to show that Roaring Kitty had built a position in GameStop that was worth $260mn, sending shares up 75% on Monday. 

This was his first post in three years, which excited some investors who are clearly following his lead and rekindling interest in meme stocks, leading to GameStop trading at more than 2,300 times its estimated earnings per share for the coming year. 

That is a pretty amazing story right? What has caught my eye in the Roaring Kitty saga is that he has invested heavily into Gamestop and that his one post considerably impacted the direction of the share price because his followers want to follow suit. 

He is driving, obviously, the share price very heavily north. I find it quite bizarre that someone can post something on social media, and ultimately benefit from it. 

To put things into perspective, Roaring Kitty has 1.4 million followers on X and his posts generate over 12 million views (sometimes more!).    

Could this trend of social media influence gain momentum in other markets, almost distorting the traditional way investors would generally go about business and invest in stocks? 

Investors would have seen headlines and share price movement thinking this would be a stock potentially worth looking at, but the problem is the volatility influencers can create. If the following day the influencer– in this instance Roaring Kitty - was to sell his shares, then the share price is likely to go the other way.   

The Roaring Kitty saga will have put the spotlight back on the role influencers have in stock picking. 

There is no doubt that reliable influencers typically have a positive reputation among their followers, while those with questionable practices may face criticism. 

Social media’s role in retail investing is only ever likely to grow and companies can no longer ignore the power influencers have on their wider positioning. They will need to look at positive ways of engaging with them or risk being more known as a meme, rather than a business.