May 2024 GME Burp

Why did the trading volume and share price of GME soar in May 2024?
Summary
Broad Context

The stock market is a highly complex ecosystem with an enormous number of participants, ranging from casual investors to highly sophisticated institutions. Market participants are constantly buying, selling, and shifting positions throughout every trading day.

It’s an ever-changing, dynamic environment with countless moving parts, from global economic forces to rapid algorithmic trades, often operating in areas where transparency is limited. With so much activity happening simultaneously and behind the scenes, it’s practically impossible for anybody to fully grasp all the factors at play that determine the trading price of a stock at any particular time.

With respect to this reality, something puzzling happened with GME stock starting in May of 2024 and lasting through June 2024. Starting at the beginning of May 2024, there was a sudden increase in GME trading volume, and the share price of GME subsequently rose significantly. It is not clear exactly what caused this to happen.

The Burp Chart

The average trading volume from the beginning of January 2024 through the end of April 2024 was approximately 4 million shares per trading day. On May 3, 2024, the trading volume suddenly shot up to 36 million shares.

Timeline

Media Narrative: Keith Gill Did It

In May and June of 2024, financial media reported on the unusual price spikes of GME stock. These articles consist mainly of 2 points:

  • Keith Gill made some posts on social media
  • The share price of GME and some other meme stocks started rising rapidly

It is left to the unquestioning reader to connect these points and arrive at the conclusion that these unusual price spikes were therefore caused by Keith Gill's social media posts with the implication that his mere presence suddenly encouraged some untold number of individuals to suddenly start buying enormous quantities of GME shares to the tune of billions of dollars in just a few days, and that this is the full explanation for what happened.

This commonly provided mainstream media narrative is superficial and somewhat absurd — an explanation is never provided that describes precisely how social media posts from Keith Gill suddenly caused the trading volume and the share price of GME and some other stocks to suddenly spike so dramatically, beyond vague and unsubstantiated attribution to retail trading activity.

It also raises an unanswered question: How and why would Keith Gill's GME-focused posts cause the trading volume and price of non-GME stocks to suddenly go up dramatically?

Furthermore, Keith Gill did not post on social media until several days after the GME trading volume and share price started going up. How could his post on May 12 cause the GME trading volume and share price to start rising on May 3?

Some GME shareholders expressed skepticism about the commonly provided mainstream narrative: "Every single person in [r/superstonk] knows this is complete nonsense. Nearly 70% of the shares outstanding traded [on May 13, 2024]. On no news!"

The articles published by the mainstream financial media consistently fail to include any mention of the fact that all of this market activity was happening just a few weeks after GameStop reported full-year profitability for the first time in 6 years when it released fiscal year 2023 results. They don't report positively at all about GameStop's outlook, despite demonstrable improvements to the company's core financial metrics. They simply do not give any attention to that. Some of them even falsely stated that GameStop "remains unprofitable."

Articles in this time period:

While it would be incorrect to say that Keith Gill's activity played no role whatsoever on the occurrence of The Burp, to imply that Keith Gill single-handedly caused all of this to happen is a false and incomplete conclusion.

The Untold Story: FY2023 Earnings Were Foundational to The Burp

The narrative provided by mainstream media is superficial and omits any substantive explanation for the sudden explosion of GME share price and trading volume starting in May 2024.

In the years prior to The Burp, GameStop was a company that was losing hundreds of millions of dollars every year, for five years in a row. The common mainstream narrative was dutifully critical of GameStop during those years. Then, on March 26, 2024, GameStop reported fiscal year 2023 earnings results, showing full-year profitability for the first time in 6 years. Curiously, when mainstream financial media reported on these results, in most cases they did not mention GameStop's income or profitability at all, and instead focused almost entirely on GameStop's declining revenue and the fact that the share price was down in the days following.

The fiscal year 2023 earnings results marked a significant trend reversal. After 5 years of weak and negative financial metrics, GameStop was suddenly profitable. Core stock metrics such as EPS and net margin flipped from negative values to positive values.

Interested market participants, using quantitative analysis and trading algorithms, would have immediately recalculated their model of GME using these updated metrics, automatically triggering position changes.

Generally, when metrics such as net income flip from negative values to a positive value, this would normally be considered "good" for a stock. Usually, when metrics improve on a stock, this entails market participants to buy the stock, and net buying of the stock would cause the price to rise.

Yet, when GameStop released the positive FY23 results, in the days and weeks immediately afterwards, the stock price went down and stayed down for a period of time until about the beginning of May — approximately 5 weeks later — at which time it exploded.

While it might be unclear exactly how or why it played out this way, from a broad point of view, it is hard to separate the cause and effect of GameStop's significant FY 2023 earnings results that were followed by sudden and significant GME turbulence only a few weeks later.

This view raises the question: if fiscal year 2023 results were foundational to the occurrence of The GME Burp that followed about 5 weeks later, then why was there a 5 week delay at all?

Contextual Relevance of the GME Financial Conflict

Relevant to this topic is the existence of the ongoing GME conflict: there are factions that are still competing over the outcome of GME stock, though this is not often acknowledged by mainstream narratives.

One faction (GME short sellers, aka GME opponents) has an ongoing financial interest in the fall of GME stock, and is supported by bearish media narratives that are critical of GME and GameStop.

The other faction (GME shareholders) has an ongoing financial interest in the rise of GME stock, and supports bullish discussion about GME and GameStop.

Pertaining to The Burp of May 2024, the commonly provided media narrative offers a surface-level explanation for what happened with GME. This narrative doesn't mention GameStop's fiscal year 2023 results at all. Furthermore, when the media reported on GameStop's FY23 results a few weeks prior, most reporting did not even mention GameStop's positive net income at all. GME shareholders are typically skeptical of these narratives that are demonstrably cynical, misleading, and incomplete.

Upon GameStop showing positive income for the first time in 6 years, this was bad news for GME opponents and good news for GME shareholders. Some might expect the stock price to rise after positive results, but it didn't, and that was arguably good for GME opponents.

Reasoned Assessment

GameStop reported positive income for the first time in 6 years, a major trend reversal. If the GME stock price rose significantly on that news, the entire narrative and ability of GME opponents to control the narrative would have been different and against their interests. The public view would have been one of indisputable cause and effect: "GME stock is going up as a consequence of GameStop reporting positive income for the first time in years, the GameStop turnaround is real."

Opponents of GME would not have benefited from that narrative, and some speculate that they did everything they could to make sure that didn't happen. That narrative would have been positive for GME, and generally it is imperative for GME opponents to ensure that all GME narratives are as negative and cynical and misleading as possible so as to deter any potential investor away from any possible consideration of investing in GME.

So what really happened?

There are basically two possibilities:

  1. Following GameStop's positive FY23 results, market participants naturally decided to sell more shares of GME than were bought, only to later decide all at once to start buying enormous quantities of GME shares at the beginning of May because Keith Gill made some posts on social media.
  2. Following GameStop's positive FY23 results, sophisticated GME opponents with an interest in preventing positive momentum and positive narratives, using a variety of tools and tactics in conjunction with bearish and misleading media narratives, deliberately caused the price of GME to go down on a temporary basis in order to create the impression that earnings were bad and the stock price was down as a consequence of bad earnings. Then, about 5 weeks later, at the beginning of May, the consequences of those contrived efforts manifested in The Burp. Keith Gill saw this coming and jumped on the opportunity in his own way, further influencing the outcome.

Possibility number one generally conforms to the dubious mainstream narrative and does not address any market complexity nor the existence of a conflict with competing participants that have an interest in the outcome of the stock, nor does it address GameStop's positive earnings at all, nor does it ever offer a positive outlook on GameStop as a company.

Possibility number two is predicated on the existence of the GME financial conflict, and attributes the curious market behavior to participants that have an interest in influencing the price of the stock for the purpose of controlling the narrative and preventing any positive momentum based on the significance of GameStop's earnings results.

If this was in fact the intention of GME opponents, then it is plausible that they used their enormous array of market tactics and advantages to create a contrived false narrative: "GameStop's fiscal year 2023 earnings results were bad, revenue was down, and the stock price is down as a consequence of those bad results. Then, in a completely unrelated event, in May some crazy meme stock frenzy happened, and it was caused by Keith Gill".

While in the short term these tactics can be used to influence the price of the stock and obfuscate the truth, over a longer period of time the reality of supply and demand forces is realized. It was about 5 weeks after FY2023 earnings results were posted when the GME volume and price started to rise. Some GME social media posts have compared this behavior to the way a beach ball shoots up out of the water after being held below the surface.

In fact, formal research has been conducted which provides empirical evidence that ETF-related fails-to-deliver tied to GME formed consistent, non-random T+35 settlement cycles, suggesting systematic exploitation of regulatory exemptions by market makers. As it turns out, 35 days very closely lines up with the period of time between the release of FY2023 earnings and the start of increased trading volume at the beginning of May.

Keith Gill's Actual Involvement

Keith Gill himself likely saw this situation formulating and made moves to gain from it. In addition to his own strategically-timed call options position, he created and posted a series of meme videos that tell an esoteric story with notions and symbols that are recognizable to some GME investors, suggestive of what he was doing and what was happening, through a veil of pop culture references.

The mainstream media narrative implies that the entire episode was caused by Keith Gill's social media posts, and sometimes insinuated that Keith Gill was guilty of market manipulation for his actions. The Massachusetts securities regulator as well as the SEC investigated Keith Gill's trading activities but did not find any wrong-doing.

It is possible that Keith Gill's purchases of GME call options during that particular time period ignited a gamma squeeze, where market makers selling those call options were hedging their position by buying shares, and the buying of shares caused the price to rise further in a feedback loop.

Keith Gill's broker E*Trade was reportedly considering banning him from its platform, "in part due to his influence over the stock."

Keith Gill's actions indisputably did create some newfound enthusiasm for GME, and it stands to reason that this would have caused some additional buying of GME by some investors. However, to attribute the entirety of The Burp exclusively to Keith Gill's social media posts is dubious, misleading and superficial.

Opportunity for GameStop

Regardless of what specifically happened to GME stock in the market during this period of time, GameStop reacted purposefully. The trading volume and share price of GME had sudden dramatic upward pressure, and GameStop used this as an opportunity to put money into the company. GameStop raised about $3.5 billion by selling shares with 3 at-the-market equity offering programs ("ATMs"), raising the stockholders' equity of the company to its highest level in the history of the company at nearly $5 billion.

"The Burp" as a Label

This phenomenon, the curious GME market events that began in May of 2024, gained an informal label from some GME shareholders as "The Burp." Here is one such example.

While "The Burp" is not a name that is necessarily recognized by all GME investors, for the purposes of this website it is a label that distinguishes this noteworthy event of the GME saga.

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