GameStop: Crushing The Fortunes Of Short Sellers

Game retailer, GameStop (NYSE:GME) has witnessed a meteoric rise in its stock price over the past few weeks. It has been one of the most affected stocks in what can be termed as a truly historic Wall Street event involving one of the largest transfers of wealth from professional investors to retail momentum traders.

Despite no significant news on the side of the GameStop management, the company’s stock price has had a spectacular run as it appreciated over 3,000% from its levels about 5 months ago, close to 685% since 2021 started, and over 250% since this week began.

GameStop’s Business

GameStop is basically a multichannel video game, consumer electronics, and collectibles retailer in the United States, Canada, Australia, and Europe. The company has a physical retail focused business model and retails new and pre-owned video game platforms; accessories, including controllers, gaming headsets, virtual reality products, and memory cards. It also sells video game software, in-game digital currency, digital downloadable content, network points cards, prepaid digital and prepaid subscription cards, collectibles, and gaming merchandise. GameStop has a large physical presence with over 5,500 stores (including the Zing Pop Culture and ThinkGeek brand stores for collectibles) across 14 countries in the world.

The COVID-19 Impact

Prior to COVID-19, GameStop was known to have a turnover above $8 billion but its business was heavily hit by the pandemic resulting in store closures for many months followed by ridiculously low gamer traffic in its stores even after the lockdown being lifted in North America and Europe. The company did manage a quarterly run rate of close to $1 billion largely because of its digital marketing strategy. GameStop does have an e-commerce presence through the GameStop, EB Games, and Micromania brands which helped it thrive in the pandemic but its stock price crashed with institutions continuing to hold short positions on the stock.

The Short Squeeze

GameStop was heavily targeted by the bears and had a short interest as high as 260% in December 2020 which means that the average share of the company had been borrowed and sold a staggering 2.6 times. It was clear that a large majority of the market was betting against the stock but the tables turned with Reddit-driven short squeeze. In a co-ordinated effort that originated on the WallStreetBets subreddit and spread across more than 2 million users as well as on zero-commission trading platform, Robinhood, GameStop witnessed what can be termed as a once-in-a-lifetime short squeeze event. The bears had taken too much of a risk by holding onto a short position for too long and the poor risk management resulted in them being forced to cover their short positions by buying the stock at sky-high prices resulting in huge losses. The retail investors who co-ordinated the short squeeze made huge profits on the other hand and the trades made up for all their notional losses on the GameStop stock in the COVID-19 pandemic. Among other stocks that benefitted from a similar kind of mayhem were AMC Entertainment, Blackberry, and Bed Bath & Beyond.

How GameStop Can Capitalize

GameStop should benefit from this rapid stock price upward movement and could consider a well-priced secondary offering to fund its operations and future growth. The advantage to the company doing it is it carries no risk for them since they issue the stock. GameStop’s fundamentals are weak and it does not appear in a position to deliver strong results so the uptrend could be shortlived. However, a share issuance at this stage would not be surprising at all. There could be no better time to bootstrap value into the company’s share by doing secondary offerings and raising to invest in the business. If the company can overcome the SEC hurdles for fundraising, it could witness a dramatic turnaround in the second half of 2021 with a greater focus on digital marketing of its products to make up for the revenue losses from the physical store closures. However, it is critical for the management to act fast as analysts are already forecasting a big plunge in the stock. Bank of America analyst Curtis Nagle is already expecting another big crash in the stock in the coming months. It is to be seen how the management can capitalize on this short squeeze frenzy.


This website is a wholly owned subsidiary of Salesparq, LLC, herein referred to as Salesparq, LLC. Our publications are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. We may receive compensation for this article on a PPC basis as an affiliate. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.PLEASE NOTE WELL: Salesparq, LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.Release of Liability: Through use of this website viewing or using you agree to hold Salesparq, LLC, its operators owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. Salesparq, LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and Salesparq, LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provided herein. Instead Salesparq, LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D. Salesparq, LLC is compliant with the Can Spam Act of 2003. Salesparq, LLC does not offer such advice or analysis, and Salesparq, LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries and extremely high degree of risk. It is possible that an investors investment may be lost or impaired due to the speculative nature of the companies profiled. The Private Securities Litigation Reform Act of 1995 provides investors a safe harbor in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements indicating certain actions & quote; may, could, or might occur. Understand there is no guarantee past performance will be indicative of future results.In preparing this publication, Salesparq, LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. Salesparq, LLC has not been compensated for this article. The advertisements in this website are believed to be reliable, however, Salesparq, LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. Salesparq, LLC is not responsible for any claims made by the companies advertised herein, nor is Salesparq, LLC responsible for any other promotional firm, its program or its structure. Salesparq, LLC is not affiliated with any exchange, electronic quotation system, the Securities Exchange Commission or FINRA.
Show More

Related Articles

Back to top button