Billionaire Ryan Cohen's investment company RC Ventures bought 100,000 shares of GameStop, a regulatory filing showed on Tuesday, sending the Texas-based video game retailer's shares 30.7 per cent higher to close at $123.14.
The meme stock surged another 16 per cent in extended trading overnight to register its biggest one-day percentage gain since March 25 last year, with trading volumes soaring and likely squeezing bearish investors who sold the stock short.
The purchase, worth $10 million, takes Mr Cohen's stake in the company marginally higher to 11.9 per cent, with the total number of shares owned at 9.1 million.
There was no clear reason for Tuesday's rally during normal trading hours, according to analysts.
Fuelled by an army of Reddit day traders looking to squeeze short sellers and giant hedge funds, GameStop came to prominence in January last year when its stock peaked at $483 a share. Only one week later, GameStop shares erased more than $27 billion in market value.
Since then, it has been a roller-coaster ride for the meme stock.
Last Thursday, the company reported a net loss of $147.5m for the fourth quarter of 2021, compared with a profit of $80.5m a year earlier, after it absorbed high costs from supply constraints and also raised spending to pivot its largely brick-and-mortar business towards e-commerce.
"The combination of supply chain issues and the Omicron variant had a sizeable impact on this past year's holiday season," chief executive Matt Furlong said on an earnings conference call at the time.
Usually, the holiday quarter is a strong one for the company as new Xboxes and PlayStations are launched and demand is high. But component shortages and other supply chain issues, which had hit console makers like Sony and Microsoft, affected GameStop's business.
Mr Cohen, who cofounded online pet products retailer Chewy and is GameStop's chairman, announced his stake increase in the video game retailer on Twitter, saying: “I put my money where my mouth is.”
Mr Cohen was appointed chairman of GameStop in June last year after he started investing in the company in 2020 in a bid to push it to focus on online sales and close unprofitable stores, which led to the Reddit-fuelled frenzy over the stock, according to CNBC.