Morgan Stanley’s (NYSE:MS) E*Trade unit is considering banning Keith Gill, also known as Roaring Kitty, from its trading platform. Gill reignited the meme stock craze this May after buying call options in GameStop (NYSE:GME) stock and bragging about a 5 million share position on Reddit.
GME stock is down about 7% as of this writing at about $25 per share, with a market capitalization of roughly $9 billion. A month ago, shares traded around the $12 mark. AMC Entertainment (NYSE:AMC), another meme stock from 2021, is down 1% as of this writing.
Stopping the Game?
E*Trade is worried that Gill, who helped kick off the original meme stock mania in 2021, is now manipulating GME stock. Massachusetts regulators are also worried about his actions. Before becoming famous, Gill worked at MassMutual.
Some of the call options Gill bought have reportedly expired, meaning he may already have a profit. His trade was said to still be active late on Monday.
With about 1 million members on the r/Superstonk subreddit, where Gill recently posted his GME position, many are cheering the infamous investor on. Morgan Stanley is reportedly worried about the reaction of these fans, should Gill be removed from the platform. The brokerage could also decide that no action is needed.
According to Fintel, GME stock has a short interest of 21.84%, including nearly half the shares held off the listed exchanges. Traders on Stocktwits have turned extremely bearish on GME recently, but some are still defending Gill and calling the entire system corrupt.
What Happens Next?
Morgan Stanley seems to be trying to jawbone the excess out of the GME trade. Options traders have raised prices for call options and used “dynamic hedging” to limit the impact of short-term moves.
Whether this all works should be known soon, if the value of GameStop moves closer to its fundamentals.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
