Chewy stock trims gains after disclosure of Roaring Kitty's 6.6% stake

By James Rogers

Investor Keith Gill, also known as Roaring Kitty, has been a central figure in the meme stock frenzy of 2021

Chewy Inc. shares pared early gains Monday after it was revealed that influential trader Keith Gill held a large position in the online pet products retailer.

The stock, which had jumped 19.9% ​​in pre-opening trading, is down 4%.

Gill's 6.6% stake – more than 9 million shares as of June 24 – was disclosed in an SEC filing.

Related: Roaring Kitty Posts Cryptic Dog Image, Chewy and GameStop Shares React

Last week, Gill posted a cryptic image of a dog on X, sparking speculation that it could be a reference to Chewy (CHWY). Shares of the pet supply retailer jumped Thursday in response to the post, but ended the day’s session down 0.3%. The stock closed down 6.2% on Friday.

Chewy shares are up 10.6% in 2024, while the S&P 500 SPX index has gained 14.7%.

Ryan Cohen, CEO of GameStop Corp. (GME), the original title of the meme, is the co-founder and former CEO of Chewy.

Related: Chewy Stock Falls One Day After Roaring Kitty's Cryptic Post About a Dog

CFRA maintained its hold rating on Chewy on Monday, noting that the stock is experiencing some volatility. “Investors should prepare for a period of prolonged volatility, even if meme stock trading lacks the same momentum as the GameStop saga in 2021,” CFRA analyst Arun Sundaram wrote.

“There are some similarities between [GameStop] And [Chewy]including ties to Ryan Cohen and high short-term interest. However, one striking difference between the two companies is the fundamental tailwind behind [Chewy]”, Sundaram added, noting that the company recently reached an inflection point in terms of earnings and free cash flow.”[Chewy’s] Short interest as a percentage of float is about 15%, but short interest as a percentage of shares outstanding is about 5%, because only about a third of the [Chewy’s] 436 [million] “The outstanding shares are floating.”

Sundaram wrote that Chewy's largest shareholder, BC Partners, owns more than 50% of the company's common stock. Last week, Chewy announced an agreement to repurchase 17.6 million shares from BC Partners for about $500 million.

Related: Why Roaring Kitty Is a GameStop “True Believer”

Of the 30 analysts surveyed by FactSet, 19 have an overweight or buy rating, nine have a hold rating and two have an overweight or sell rating on Chewy.

Gill’s return to social media in May sent GameStop shares soaring. The stock jumped again after a Reddit post on June 2 by an account associated with Gill appeared to show he owned a significant stake in the video game retailer.

The trader, who played a central role in the meme-stock frenzy of 2021, discussed his GameStop position during a closely watched YouTube livestream on June 7, his first in three years. Gill noted an “overemphasis” on GameStop’s historical activity during the livestream. “They’re in a transformational phase,” he said before praising Cohen, saying, “I believe this guy could do it.”

Related: GameStop CEO Ryan Cohen posts on X for first time in months as retailer seeks app developers

On June 13, Gill, who also posts on social media under the handle DeepF-kingValue, revealed that he had increased his stake in GameStop in an update shared on his Reddit account. Gill also sold some or all of his call options with an expiration date of June 21, according to the update.

GameStop shares are down 4.9% on Monday.

Barbara Kollmeyer contributed.

-James Rogers

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07-01-24 1424ET

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