GameStop tumbles 40% as 'Roaring Kitty' trader says little new about retailer on livestream

GameStop's announcement of a significant sales drop in the first quarter led to a decline in the company's stock price. The stock fell by over 20% ahead of Keith Gill's (aka "Roaring Kitty") livestream, and continued to drop during his stream, reaching a decline of nearly 40%. This was GameStop's worst session since 2021 and marked the stock's fourth worst day in history. The market's negative reaction to the sales drop and the company's plan to sell more shares overshadowed Gill's livestream, where he reiterated his investment thesis and expressed belief in the company's reinvention under CEO Ryan Cohen.

If Keith Gill, also known as the "Roaring Kitty," decides to exercise his 120,000 call options against GameStop, there are several financial implications to consider.

1. Cost of Exercising Options: The cost of exercising the options would be the strike price multiplied by the number of options. In Gill's case, the strike price is $20. Therefore, the total cost would be $20 * 120,000 = $2,400,000.

2. Ownership of Shares: Upon exercising the options, Gill would own an additional 12 million shares of GameStop. This would make him the fourth largest shareholder in the company.

3. Potential Profit: If the price of GameStop's stock is above the strike price of $20 at the time of exercising, Gill could potentially make a profit. For example, if the stock price is $30 when he exercises the options, he could immediately sell the shares for a profit of $10 per share. This would equate to a total profit of $120,000,000.

4. Tax Implications: Exercising stock options can have significant tax implications. The difference between the strike price and the market price at the time of exercising is considered taxable income. The tax rate would depend on Gill's overall income and tax bracket.

5. Market Impact: The exercise of such a large number of options could potentially impact the market price of GameStop's stock. If other investors become aware of Gill's actions, it could influence their buying and selling decisions, potentially leading to volatility in the stock price.

6. Risk: By exercising the options, Gill would be converting his potential profit into actual profit. However, this also means that he would be exposed to the risk of the stock price falling below the strike price. If the stock price falls below $20, Gill would be holding shares that are worth less than what he paid for them.

In summary, exercising his 120,000 call options against GameStop could result in significant financial implications for Gill, including the cost of exercising the options, potential profit, tax implications, market impact, and risk exposure.