- GameStop and AMC Entertainment extended their gains on Tuesday to more than 100%.
- The return of the meme stock surge was sparked by a tweet from Keith Gill AKA Roaring Kitty.
- AMC Entertainment took advantage of the massive rally by selling shares to raise capital.
What began with a Sunday evening tweet from Keith Gill, AKA Roaring Kitty, has materialized into a massive short-squeeze rally that has taken shares of GameStop and AMC Entertainment up 74% and 78% on Monday alone.
Those gains increased sharply on Tuesday as momentum continued to build around the meme stock trades. Before the opening bell, shares of GameStop and AMC soared as much as 158% and 132%, respectively.
The rallies have pushed a massive short-squeeze in the stocks, not unlike the 2021 rally that caught Wall Street short sellers off guard and sank a prominent hedge fund.
The percent of the share float sold short was 24% for GameStop and 18% for AMC, according to the most recent data.
"All this feels like an echo of early 2021, when this account helped fuel a vicious short squeeze in GameStop," DataTrek co-founder Nicholas Colas said in a Tuesday note.
"If you are short a stock that is up 47 percent at the open (as GME was this morning), your only choice is to close out the position regardless of the price. Prudent risk management demands it. The most a stock can drop is 100 percent, but it can go up multiples of that," Colas said.
The stocks ultimately did prove to be great short bets after their initial 2021 short-squeeze rallies, with both companies seeing a deterioration in their underlying fundamentals as video game sales shifted to digital and the box office struggled to return to its pre-pandemic levels of movie ticket sales.
Both stocks were down about 90% from their respective 2021 peaks, but now GameStop stock is trading at its highest level since late 2021, while AMC is trading at levels it last saw in October 2023.
Other stocks with high short interest that are surging on Tuesday include SunPower and BlackBerry.