😺 Roaring Kitty's new GameStop play

What’s going on here?

Keith Gill, a.k.a. “Roaring Kitty,” seemingly exited all his GameStop call options and now holds around nine million shares.

What does this mean?

Gill, who sparked the original GameStop trading frenzy, seems to have shifted strategies. Earlier this week, his Reddit account showed that he owned five million GameStop shares and 120,000 call options, which were due to expire next week. They’re essentially contracts that give the buyer the option to buy a share for a certain price up to a set time in the future. The investor can either “exercise” them and turn them into shares, sell the contracts on, or let them expire. And according to a screenshot posted on the social media site yesterday, Gill now owns nine million GameStop shares and zero call options. Number-crunching traders believe he sold 80,000 of the options and exercised the other 40,000, meaning Gill now owns $260 million of GameStop stock.

Why should I care?

Zooming in: Cash money.

GameStop has taken advantage of its pumped-up stock, selling new shares and raising $3 billion over the past month. That’s a whole lot better than going to the bank for a loan when interest rates are so high. Now, the company was already boasting around $1 billion in cash with just $500 million in debt before the raises. But GameStop barely turns a profit, so the bigger the safety net, the better.

The bigger picture: The game is on.

The GameStop craze is clearly far from over. In fact, the firm’s digital conference call system crashed during this week’s annual shareholder meeting, overwhelmed by the number of beady eyes joining the call. No wonder retail investors are so interested: the stock has tripled to $29 since the beginning of May – and even if it starts to slip, GameStop can afford to buy back shares to push the price back up.

What’s going on here?

US companies, ahem, beefed up their cash reserves last quarter to reach a record stash of $4.1 trillion.

What does this mean?

Companies are sitting on 12.6% more cash than last year – around $1.3 trillion above pre-pandemic levels. See, high interest rates are making it more attractive to save than borrow money – and flush with cash, companies are finding more confidence to risk making short-term investments. Now, most of that money is parked in cash and cash-like instruments – think deposits, loans, and securities – which can currently pull in returns of roughly 5%. But extra savvy companies are funneling their stash into longer-term investments like corporate and US government bonds. They require more patience, but could ultimately be more profitable and less risky over time.

Why should I care?

Zooming out: It pays to keep pockets lined.

With interest rates at decade highs, nearly one in ten non-financial companies in the S&P 500 earned more from interest on their cash than they paid on their debts last quarter. Besides that solid income, cash can act as a safety net and let companies jump on money-making opportunities quickly. But that can be a double-edged sword. Some execs use spare change to make unprofitable purchases in the name of ego, buying assets to crank up their clout and build an empire – even at the expense of shareholders.

The bigger picture: A merry tune.

Companies can also use that cash to carry out an investor-approved trick: share buybacks. By buying back more shares and reducing the supply of them in the market, firms can – all else equal – push up the price of the remaining shares. So with all that money in the bank, Goldman Sachs expects US share buybacks to jump 16% next year and pass $1 trillion for the first time. If that pans out, it could keep the US market rally going strong.