Peak ‘Roaring Kitty’? Dog-Tweet Rally Shows His Power and Limits

(Bloomberg) — The latest social-media frivolity this week from the man known as Roaring Kitty sent traders frantically reading into a cartoon featuring, of all things, a dog.

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Was Keith Gill getting into WOOF? (Petco Health & Wellness Co.) Perhaps PET? (Wag! Group Co.) Or, quite possibly, the company that was co-founded by Ryan Cohen, GameStop Corp.’s current chief executive, CHWY? (Chewy Inc.)

His legions of retail traders — tracking @TheRoaringKitty on X and u/DeepF——ingValue on Reddit — didn’t wait to find out. Each stock jumped by at least 12% after the dog post, triggering trading halts that in pre-meme years were usually reserved for merger news or management changes.

Much like when Gill renewed a bout of GameStop fever with a photo of a gamer leaning in with his controller, the episode has longtime market observers on edge about the influence of a retail-trading ringleader with the power to bend markets, for potentially their own personal gain. It’s one thing when there’s obvious falsehoods or misrepresentations, but how, they wonder, could authorities ever fault someone for what Redditors or bots read into a meme?

Or, to put it bluntly: Who does this guy — and the traders who track him — think he is, exactly?

“Crypto folks are probably laughing at the equity market. Someone posts a picture of a dog, and stocks rip,” said Joseph Saluzzi, partner and co-head of equity trading at Themis Trading. “We talk about how bad the crypto market is — just unregulated craziness — but here we are.”

Now concern is rising that this year’s meme frenzy will end badly for the amateur crowd, once again. While Gill has long made a fundamental case for GameStop, it’s less clear how to interpret his potential foray into pet companies.

Richer Memelord

Sure, Elon Musk, a fellow memelord, can sway the price of dogecoin with a mere mention on Saturday Night Live, or roil shares of Tesla Inc. by putting up a poll about selling a chunk of his stake. But with a fortune in excess of $200 billion, and with a handful of interconnected companies in his control, he has the financial might to shift markets.

Gill though? He earned a CFA charter and was previously employed by Massachusetts Mutual Life Insurance Co., in effectively an unremarkable office job. Yet, in the meme-stock era he helped usher in, he’s built up a sizeable fortune by all accounts.

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The latest market moves suggest at least some Roaring Kitty fatigue is kicking in. Petco shares closed little changed on Thursday, and ended the week just 6.8% higher than where they started. Wag! Group, after at one point on Thursday notching its biggest daily gain in 10 months, fell 4.2% on Friday. Chewy, which nearly hit a one-year high on Tuesday, closed out the week by falling 6.2%.

“It’s clear his impact is becoming shorter- and shorter-lived with Chewy down since the dog meme from yesterday,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. “The more the trading community sees the Roaring Kitty story play out (tweet, stock spike, stock crash), the shorter the time frame becomes for each interaction.”

The speed at which the pet-related shares rallied — and then reversed — raises questions about the traders who are heeding Gill’s purported populist call more than three years ago. Back then, he and a group of Redditors famously wreaked havoc on short-selling hedge funds and provided a windfall for the retail crowd.

That celebration didn’t last long. When the risk-on spirits took a U-turn in 2022, amateur traders gave back all of the meme-era gains within months, Morgan Stanley’s analysis at a time showed.

“If hedge funds aggressively short Chewy, GameStop and other meme stocks, you’re essentially trading against an 800 pound gorilla,” said Oliver Pursche, senior vice president and adviser at Wealthspire Advisors. “If you’re betting on this with your retirement money, I’ll say a prayer for you and wish you well.”

The fact that there’s appetite to ride volatile meme stocks has caught some onlookers by surprise, given the different economic backdrop from its original fervor in 2021. The pandemic excess savings buffer is depleted and then some, helping drive a decline in consumer firepower.

But, at least in the US market, there appears to be plenty of ammunition to lift broad indexes — and, at least for a moment, the Roaring Kitty stock of the day.

“The fervor to speculate is still very much alive,” Danielle DiMartino Booth, CEO and chief strategist at QI Research, said on Bloomberg Radio. “People are still ready to gamble on the stock market as if the pandemic just hit the shores. It again shows you that there’s a great big willingness to take risk.”

–With assistance from Emily Graffeo, Carmen Reinicke and Stefani Reynolds.

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