Stock Market

KOSS Stock Plunges 20% as Roaring Kitty Hype Fades

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When it comes to social media frenzies, securities that meme trader Keith Gill — known online as “Roaring Kitty” — own do not represent the only avenue for extreme upside. Rather, speculation about what Gill could buy next can be just as powerful. Consider the case of consumer electronics specialist Koss (NASDAQ:KOSS), which went skyrocketing last week. Unfortunately, the fervor appears to have faded, with KOSS stock down sharply on Monday.

At one point, shares slipped more than 20% before modestly paring back some of the red ink. According to a Reuters report, some of Gill’s followers took note of a cryptic post that the trader made on social media. Scrolled across at the end of a video, an image shown as an emoji featured a microphone with the U.S. flag set in the background.

Some retail investors speculated that Roaring Kitty would acquire KOSS stock on or around the Independence Day holiday. Given Gill’s history of obscure social media activities leading to significant investment positions, excitement over the consumer electronics firm soared. However, other voices expressed skepticism, noting that Koss is primarily a headphone manufacturer.

Unfortunately, Gill has yet to make a public post about KOSS stock directly. As a result, speculators may have become disheartened, hence Monday’s big loss.

The Fundamentals Eventually Mattered for KOSS Stock

In the investment market, a commonly expressed theme is that the fundamentals will eventually matter. Stated differently, it’s always possible for an equity to become disassociated with the core set of qualitative and quantitative data that undergirds a company’s valuation. At some point, though, this disassociation tends to correct itself.

That may also be contributing to the current weakness in KOSS stock. Steve Sosnick, a market strategist at Interactive Brokers, stated simply that “[t]here are absolutely no fundamental reasons why this company might be worth four times what it was at the beginning of the week.”

It’s worth pointing out that according to Yahoo Finance, KOSS stock trades at 10.02x trailing-year sales. However, the average revenue multiple between the first quarter of 2023 and Q1 2024 sat at only 2.4x.

Moreover, Sosnick and other traders stated that almost 50% of the company’s 9.25 million shares are held by insiders. That means the public float is quite small, allowing for modest purchasing upticks to result in robust swings. At the same time, the opposite is also true, contributing to today’s market volatility.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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