GameStop slides amid Roaring Kitty YouTube return, slumping sales

Updated at 7:55 AM EDT

GameStop shares moved lower Friday, potentially pausing an extraordinary one-month gain that has added some $10 billion to the money-losing retailer's market value, as its fans and investors look to the first public appearance of meme stock legend Keith Gill in more than three years. 

Gill, a former MassMutual executive who goes by the name Roaring Kitty on his myriad social-media platforms, has been touting the value of GameStop  (GME)  shares since late 2020.

Having triggered the first meme stock rally in January 2021 through hours of livestreamed events on his YouTube channel and posts and discussions on the Wallstreetbets segment of Reddit, Gill stepped back from public view as the stock retreated and the group's fortunes waned.

His return in early May, however, with a cryptic post on the X social media website of a man leaning forward in a chair, ignited another GameStop rally that has seen the stock surge more than 185% over the past month, ratcheting up the market value of the Grapevine, Texas-based retailer.

Gill is slated to return to his livestream roots today as well, with his fist YouTube appearance in more than three years slated for noon Eastern Time.

Roaring Kitty returns

The value-based case for GameStop shares will be more difficult to make this time around, given that the company has posted only two profitable quarters in the past three years and continues to see sales shrink under the leadership of CEO Ryan Cohen. 

GameStop in fact posted an update for the three months ending on May 4 that showed a net loss of $32.3 million as sales fell 29% from the same period last year to $882 million.

Related: SEC options probe reports rock GameStop stock after Roaring Kitty returns

Gill's fortunes have shown to be far more impressive; the trader's five million share stake in GameStop is now valued around $232 million as of last night's close. He also owns call options, giving him the right to buy GameStop shares at $20 each, which were last valued at $65.7 million.

GameStop added that it might sell as many as 75 million new common shares to capitalize on the share's recent surge.

GameStop previously used the mid-May surge in its shares to sell 45 million new common shares, raising around $933 million that it said could be used for new investments or acquisitions.

GameStop shares were marked 15.2% lower in premarket trading following news of the share sale to indicate an opening bell price of $39.50 each.

Short interest in the group, of course, remains highly elevated, given its weakening financials and the lack of a profitable corporate strategy.

Short sellers in the red

Data from S3 Partners suggest total bets against GameStop are valued at $1.3 billion, with around 47.6 million shares, or 17.7% of the float outstanding, shorted.

Short sellers bet against a company by borrowing shares and selling them. If the price of the stock declines, the short-sellers will buy back the shares at a lower price, return the borrowed stock (while paying a fee), and pocket the difference.

Related: Roaring Kitty reveals staggering GameStop stock buy

Betting against GameStop has proven to be a losing proposition, however, with S3 data suggesting short sellers have lost around $626 million over the past 30 days. 

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