Yahoo Finance Chewy Slumps Even as Keith Gill Reveals $229 Million Stake
(Bloomberg) -- Chewy Inc. shares erased gains after initially spiking as much as 10% on Monday as Keith Gill — known online as “Roaring Kitty” — disclosed a 6.6% passive stake in the online pet food and product retailer.
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The disclosure with the US Securities and Exchange Commission shows Gill owns roughly 9 million Class A shares, worth about $229 million based on Monday’s closing price. Shares of Chewy and Petco Health and Wellness Co. briefly soared last week after Gill posted a cartoon image of a dog on X. Chewy has jumped about 70% since the start of May, but remains 79% below its 2021 peak.
“This is a game changer,” said Steve Sosnick, chief strategist at Interactive Brokers. “Having a position sizable enough to justify a filing is very different than signaling moves via cryptic memes.”
Still, Chewy shares closed down 6.6% on Monday. A representative for Chewy didn’t respond to a Bloomberg News request for comment.
Gill, who shot to fame in 2021 as he rallied retail traders around GameStop Corp., returned to social media earlier this year, setting off a volatile period for the firm’s shares as well as those of other so-called meme stocks. His reemergence sparked a short-term rally in GameStop shares, which the firm quickly capitalized on, raising more than $3 billion through at-the-market offerings.
The popular stocks influencer, Gill, was sued in a proposed class action filed Friday in Brooklyn, New York, federal court for allegedly orchestrating a “pump and dump” scheme involving GameStop shares.
Chewy, which ships supplies like pet food directly to customers, has elevated short interest — a characteristic common across meme stocks including GameStop. Short interest as a percentage of free float has climbed to more than 17%, data from S3 Partners show.
The video game retailer and Chewy also have another common thread: Ryan Cohen. Cohen, who co-founded Chewy, is GameStop’s current chief executive officer. Shares of GameStop fell 5.5% on Monday.
“Chewy might be a better meme stock trade compared to GameStop because the company is still in its early stages of growth and recently hit an inflection point in terms of profitability and free cash flow,” said Arun Sundaram, vice president and senior equity analyst at CFRA Research. “It is probably a ‘safer’ meme stock trade if such a term exists,” he added.
Options trading in Chewy was also mixed. Implied volatility for calls rose more than puts, signaling continued bullish sentiment among investors, especially for contracts expiring in the next couple of weeks. However, total volume of puts was on track for the highest single-day level since December 2021 — a sign that enthusiasm is muted.
Monday’s filing lists June 24 as the date of event and contained a tongue-in-cheek reference to Gill’s “Roaring Kitty” persona. The document, which appears in the SEC’s Edgar database of corporate filings, includes a section at the top for the reporting person to “designate whether you are a cat” followed by two check boxes.
The first option reads “I am a cat.” and the other, which is marked, says “I am not a cat.”
“One has a sense that he’s kind of playing games or deliberately trying to skirt the line,” said Jill Fisch, professor at the University of Pennsylvania Carey School of Law. “Most people don’t want to disclose more information than is absolutely necessary,” she added.
However, “it’s certainly not fraudulent for him to say he’s not a cat,” Fisch said.
--With assistance from Lydia Beyoud, Katrina Compoli and David Marino.
(Updates stock moves throughout and chart; adds details on options trading and Fisch commentary.)
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