(Reuters) - Shares of retail darlings GameStop and AMC more than doubled on Tuesday after posts from "Roaring Kitty" Keith Gill raised chatter about the return of the central figure behind the 2021 meme stock frenzy.
Trading in GameStop was halted multiple times within minutes of market opening due to volatility as the stock hit its highest level since June 2021.
The stocks were set to extend gains from the previous session after Gill shared a meme and more than 10 clips from movies, including "X-Men Origins: Wolverine", "The Avengers" and the 1993 Western "Tombstone".
Even though the posts did not mention company names, shares of video game retailer GameStop and AMC, the world's largest theater chain, were the most-traded stocks by retail investors on Monday, J.P.Morgan data showed.
That was mainly because Gill, who is returning to social media platform X after a gap of nearly three years, is credited with sparking the so-called Reddit rally in January 2021 with bullish calls on GameStop.
"The fact that Roaring Kitty is back should be meaningless to the stock market (but) the fact that it isn't is fascinating," said Matthew Tuttle, CEO of Tuttle Capital Management.
GameStop surged as much as 118% on Monday and closed at a two-year high, with its market capitalization jumping nearly $4 billion to $9.32 billion.
Short sellers were set to lose $1.2 billion on paper on Tuesday, slightly more than Monday's losses, analytics firm Ortex Technologies said.
"Today's losses will put a lot of short sellers on tilt and squeeze them out of their positions with their buy-to-covers pushing GME's stock price even higher," said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.
AMC said it has completed a $250 million share sale at the market price on Monday as its stock surged 78% to $5.19, more than double from a record low hit in mid-April.
The frenzy also spread to shares of micro-cap companies.
Shares of Reddit rose 7.3%. The social media firm was used by retail investors in 2021 to coordinate and target highly shorted stocks, culminating in a Wall Street versus Main Street battle.
Retail investor-focused brokerage Robinhood, which made zero-commission trades mainstream, gained 7.5%.
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Speculative trades are unlikely to last long, analysts said as the economic backdrop of hot inflation and high interest rates is a contrast to the era of cheap money and pandemic savings in 2021.
"This meme rally maybe rhymes with 2021 but is unlikely a repeat," said Ben Laidler, global markets strategist at digital brokerage eToro.
About 600,000 GameStop options contracts changed hands on Monday, far below the volumes seen in early 2021 of one million to two million contracts, said Brent Kochuba, founder of options analytic service SpotGamma.
However, the implied volatility of GameStop options, a measure of investor expectations for price swings in the shares, jumped very quickly in the previous session to levels that rivaled 2021.
"This suggests that the reaction of market makers (increasing options prices) to a potential repeat of GameStop mania was very fast," he said.