(Bloomberg) -- As a renewed bout of GameStop Corp. fever gripped the meme-stock faithful, fans of trading influencer Keith Gill waited for one moment: The day their hero, aka “Roaring Kitty,” aka “Deep F—-ing Value,” would become a billionaire.

The notion was hardly far-fetched. Over the course of two weeks, Gill had been posting images of a massive stake in GameStop and its call options in a portfolio that peaked at more than $550 million on June 6. Though he’s added even more stock since then, the dollar value of his holdings has dropped along with the company’s shares.

With the stock little changed since the early days of its latest mania, a new kind of anxiety is building among Wall Street and retail traders alike.

The original 2021 GameStop rally shook the idea of short-selling to its core — eroding the appeal of betting against a floundering company when you can wind up feeling the wrath of Redditors. This time around, the existential question is about what counts as market manipulation. 

Does posting a meme, potentially delivering an instant profit, violate the spirit of free and fair markets? Has the David versus Goliath nature of meme stocks shifted? What if Roaring Kitty is the Goliath? And how exactly did he build a position bigger than Charles Schwab Corp.’s?

“The original meme stock craze was us versus them, with ‘them’ being the guys who would short-sell millennials’ favorite companies like GameStop,” said Steve Sosnick, chief strategist at Interactive Brokers. “But I’m not sure who ‘them’ is anymore.” 

Gill didn’t reply to a request for comment. 

Losing Charm

The populist ringleader of a short squeeze that shook Wall Street in the original 2021 meme-stock rally, Gill is losing his folksy charm, at least for some followers. Trading firms and even some former fans are eying Gill with more suspicion, as Redditors pose questions like: “How is Roaring Kitty coming back not a basic pump and dump scheme?”

By Thursday, Gill’s brokerage account snapshots suggested he’d unwound an earlier position of 120,000 call options and added more GameStop, upping his portfolio to about 9 million shares of the video game retailer, worth more than $262 million. (Gill’s final post of 2021 showed he had 200,000 shares worth more than $30 million; GameStop did a four-for-one stock split in July 2022.)

As Gill’s actions sent the price soaring again, GameStop seized on the volatility to sell more than $2 billion worth of stock. 

All told, anyone who bought shares over the past month and held was about as likely to lose money as profit. To some, one major difference is hedge funds and other sophisticated investors have adapted from three years ago and are likely to come out ahead — at the expense of Gill’s retail-trading fans. 

“Some of the quantitative managers have models to look at the trends in price and those models are extremely quick to get out of the stock if they see significant downside volatility,” said Don Steinbrugge, chief executive officer of Agecroft Partners, which helps hedge funds raise money. “At some point retail investors are going to wise up and realize there’s a lot of danger.”

Manipulation Concerns

The episode brought to the fore questions of what constitutes market manipulation. The Wall Street Journal reported Morgan Stanley-owned brokerage E*Trade was considering barring Gill from its platform over such concerns, after previously banning other popular personalities like Dave Portnoy, the Barstool Sports founder who streams as Davey Day Trader and said he got kicked off of the brokerage.

A spokesman for E*Trade declined to comment.

What’s singular about Gill’s case is that market manipulation typically involves pushing a price higher to profit off the stock movement, said Craig Marcus, a partner and co-chair of the capital markets group at law firm Ropes & Gray. If Gill’s snapshots are real, that hasn’t obviously been the case, he said. 

“You can disagree with his thesis about the value of the stock, but if all he’s doing is executing on his thesis and not doing manipulative things to profit,” it’s difficult to prove ill intent, Marcus said in an interview.

To be sure, Gill was accused of using his clout to manipulate prices even three years ago when he first arrived on the public stage. In 2021, a lawsuit against Gill and MassMutual alleged he was manipulating markets with his outsize influence on certain stocks. 

“Three years ago this was funny,” said Peter Atwater, an adjunct professor of economics at William & Mary. “People have become more bothered by this than amused by it, and that to me is an indication that it is unlikely that this behavior will be allowed to continue.”

When Gill scheduled a highly anticipated return to YouTube on June 6 without details of what he’d talk about, the stock shot up nearly 50%, adding $16 billion to its market value in a matter of hours. 

In the livestream, which garnered hundreds of thousands of viewers, Gill vamped for about an hour against the backdrop of GameStop’s violently fluctuating share price. He seemed to sense the possibility he’d draw more scrutiny from fans, regulators and trading professionals. 

“Do I have to be careful what I say here?” he asked.

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