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Congressional scrutiny of GameStop financial saga
Lawmakers are examining whether wild swings GameStop’s stock price of has exposed conflicts in the market’s structure that can hurt unsophisticated investors. Rep. Maxine Waters says “many Americans feel that the system is stacked against them.” (Feb. 18)
Keith Gill said 2020 was a difficult year for his family. On top of the COVID-19 pandemic, his sister Sara died unexpectedly at the age of 43.
The Brockton native said it brought him joy to share good news about the success of his investments in the gaming retailer GameStop.
“I was so happy to visit my family in Brockton for the holidays and give them the great news – we were millionaires,” Gill said in his written testimony released before he was called before the U.S. House Committee on Financial Services Thursday.
“That money will go such a long way for my family. We had an incredibly difficult 2020….I am grateful to be able to give back to my community and to support my family, most of all my wife Caroline who has stuck with me through very tough times.”
The committee brought Gill in to testify virtually at the hearing along with the leaders of two hedge funds, the investing app Robinhood and the social media site Reddit.
The hearing was called to examine recent stock market volatility involving GameStop and other stocks and to look at institutional practices by Wall Street firms and the evolving role of technology and social media in the markets.
Gill is also known as “Roaring Kitty” on YouTube and Twitter and “DeepF***ingValue” on Reddit. In videos, he has talked about his investing style and followed business developments and corresponding stock prices for GameStop.
Gill also posted progress about how his GameStop investments in a Reddit forum called WallStreetBets.
Some people there also bought stock in GME as a way to block hedge funds that were shorting it to profit, which contributed to its shares ballooning from under $20 at the end of 2020 to a high of $480 at the end of January before the stocks plummeted.
Gill’s initial investment of about $53,000 turned into millions.
In his testimony, he said his investment was a success not only because it made him money, but because how the money can be used to help his family and community.
“A little about my background: I grew up in Brockton, Massachusetts. My father was a
truck driver, and my mom a registered nurse,” said Gill, a former Brockton High School and Stonehill College track and field star.
“I was one of three kids, and the first in my family to earn a four-year college degree when I graduated from Stonehill College in 2009, amid the Great Recession and without a long-term job. My first post-college job was in operations at W.B. Mason, an office supplies company headquartered in my home town of Brockton,” he said.
He was introduced to investing when he worked with a family friend at a start-up company in New Hampshire and tried to build a software program to help investors analyze stocks and provide related research.
That is where he learned to do the work of looking through a company’s financial records and focusing on its real long-term value rather than market sentiment, Gill said in his testimony.
He married his wife, Caroline, in 2016 and started at another job, which he left by the next year.
For the next two years, Gill said he was unemployed and actively began analyzing stocks to increase his family’s savings.
“It was both a way to make money and an interest that I pursued passionately while I lacked a job,” he said in his testimony.
April 2019 is when Gill accepted a marketing and financial education job at MassMutual. He and wife were happy about their prospects and to have benefits again. Gill said before that, he had never made over $100,000 for a yearly salary.
That position was director of financial wellness education and his job was to develop education classes advisors could bring to prospective clients. Selling securities or being a financial advisor was not part of his work, Gill said.
In his own time, Gill used publicly available information to analyze stocks and invested for his family, he said. In June 2019 is when he saw GameStop’s stock decline and was below what he thought was fair value. He purchased call options and increased his positions throughout that year and 2020.
Gill knew of GameStop from growing up playing video games and shopping at the retailer. He saw that the legacy business had a chance to reinvent itself and grow within the gaming industry.
Even now, Gill said he is still bullish and believes that the company’s stock could see a potential turnaround.
“And what’s stunning is that, as far as I can tell, the market remains oblivious to GameStop’s unique opportunity within the gaming industry,” he said in his testimony.
Gill said he shared his investment ideas on social media because he thought they could help others and he could find ways to improve based on the critiques he received.
He said it’s something that hedge funds and Wall Street firms with teams of analysts are able to do, giving them an advantage over individual investors.
“Social media platforms like YouTube, Twitter, and WallStreetBets on Reddit are leveling the playing field,” Gill said in his testimony.
“And in a year of quarantines and COVID, engaging with other investors on social media was a safe way to socialize. We had fun.”
He denies that he used social media to promote GameStop. Gill said he made it clear that the videos were for educational purposes and that his investment style isn’t for everyone.
Less than 100 people would tune into his streams and as of Christmas he had around 500 subscribers on YouTube and followers on Twitter, he said.
“The reality was people didn’t really care about boring, repetitive analysis of GameStop and other stocks, and that was fine,” Gill said in his testimony. “For those of us who did care, the stream provided us an outlet for refining our fundamentals-based thesis. We were able to analyze events in real-time and keep each other honest.”
He extended the task of explaining what happened to the stock market in January to others.
Gill said he is thankful that the committee is looking into what occurred because “it’s alarming how little we know about the inner-workings of the market.”
Staff writer Mina Corpuz can be reached by email at firstname.lastname@example.org. You can follow her on Twitter @mlcorpuz. Support local journalism by purchasing a digital or print subscription to The Enterprise today.