Chewy Stock Pops on Huge ‘Roaring Kitty’ Bet

Chewy Stock Pops on Huge ‘Roaring Kitty’ Bet

Shares of online pet food retailer Chewy soared on Monday as well-known investor Keith Gill, aka “Roaring Kitty”, revealed he had purchased 9 million shares in the pet food retailer. The position was disclosed in an SEC filing on July 1, which noted that Gill owned about 6.6 percent of Chewy’s stock.

Gill’s purchase price was not mentioned in the filing, but the stake is worth about $248 million with Chewy shares at $27.50. Over the previous week, the stock traded mostly between $26 and $30 per share, with a notable spike to the mid-$30s on Thursday, around the time the investor posted a cartoon image of a dog to his X account.

Gill was the most outspoken supporter behind the social media frenzy that helped drive GameStop to the moon in late 2020 and early 2021.

Roaring Kitty buys another meme stash

Gill’s purchase of Chewy follows his recently announced purchase of troubled retailer GameStop, a so-called meme stock that has caught the fancy of traders via social media. At one point, Gill revealed a stock and options position in the video game retailer, sending those shares soaring. The company took advantage of the price increase to issue new shares of its stock.

Both Chewy and GameStop are connected to CEO Ryan Cohen. Cohen founded the pet company and stepped into the role of GameStop CEO in September 2023.

It’s not entirely clear whether Gill’s newly disclosed position in Chewy is in addition to his previously disclosed stake in GameStop, which was worth more than $180 million when he announced it in early June. Shares quickly moved higher when his ownership was confirmed.

With the price of GameStop having fallen from its highs above $45 in recent weeks, the price is now around the estimated breakeven price for Gill’s GameStop trade of around $23.

Gill has not published an investment thesis for Chewy, as he did for GameStop during a YouTube livestream in June. But in that livestream, Gill noted that he liked the stock because of Cohen’s leadership and that he expected Cohen to lead the retailer to a turnaround.

Meme stocks are proving to be extremely risky bets for investors

The volatility of GameStop stock is a great example of why traders love meme stocks so much and why they are so dangerous for people looking to build wealth over the long term.

The volatility of meme stocks—fueled by social media chatter that fuels interest—allows savvy traders to enter the market and exploit price spikes, quickly scalping huge profits. The chatter could quickly become self-sustaining, at least for a while, as individual traders, algo traders, and artificial intelligence (aka AI) identify where attention and money is flowing and buy stocks and options.

That volatility works both ways, though. For every winner who sold GameStop at $45 a share in June, someone bought that stock expecting it to rise. Now that the stock is trading at half that price just weeks later, those investors are potentially left with huge losses.

So those looking to make a quick buck from meme stocks may soon find out that they’re the ones getting scammed. With individuals competing against powerful computer traders, it’s a tough place to consistently make money, and active traders generally underperform long-term passive investors.

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