What Is GameStop, the Company, Really Worth? Does It Matter? The New York Times

This huge disconnect between GameStop’s stock price and how the company is actually doing has created one of the more bizarre moments in Wall Street’s over 200-year history. GameStop was one of the companies that loads of hedge funds (companies who do these bets) had bet on to lose a lot of value. Massachusetts regulator William Galvin compared the situation Wednesday to the 1999 tech stock bubble.

For one thing, the volume of trading has strained the computer infrastructure of online brokerages, including TD Ameritrade, which said Wednesday that its mobile app was handling unprecedented volumes. And while WSB had gotten some media attention in recent days for its GameStop boosterism, a boom in coverage of GameStop and WSB helped bring the story out of the financial world and more into the mainstream. GameStop was one of the most shorted of all publicly traded companies. Other companies on the list include AMC Theatres, Bed Bath & Beyond and even the mostly defunct Blockbuster. “I’m actually hosting a meeting later this morning with top regulators at the SEC and the Commodity Futures Trading Commission, and also the Federal Reserve to discuss recent developments,” Yellen told ABC News’ Robin Roberts. “We really need to make sure that our financial markets are functioning properly, efficiently, and that investors are protected.”

By the end of the year, the company’s stock was trading at almost $20. This recovery attracted the attention of Wall Street, including the eyes of many sizeable hedge funds. Because short sellers — frequently hedge funds — in essence are betting against a company’s success, it can be a risky position. https://www.investorynews.com/ Any positive news or enthusiasm for the stock will push up the stock’s valuation, minimizing profit for the short seller. In the case of GameStop, chatter on massive online trading forums invigorated interest in buying the stock, pushing up the price, which in turn fueled more interest.

Jan. 22, 2021: GameStop surges 50%

But long shots can go on for extended periods if the players have enough resources to risk. Tesla, for example, would need 1,600 years of profits to justify its current price-to-earnings ratio, https://www.currency-trading.org/ according to a calculation this month. Tesla CEO Elon Musk, the world’s wealthiest person, who has also publicly battled short sellers, tweeted out Tuesday, “Gamestonk!” with a link to WSB.

Naturally, this led to widespread accusations that it was protecting the wealthy billionaire hedge-funds managers—the Goliaths—at the expense of the Davids. The simplest answer is that its stock price has skyrocketed — by somewhere around 8,000 percent over six months. The more complex answer is that its stock has become the central game piece in a financial power struggle between a major hedge fund, Melvin Capital, and a group of amateur stock traders who yell on the internet. GameStop is an American brick-and-mortar retailer that specialises in video games, consumer electronics and gaming merchandise. It was widely deemed a company in declining health—indeed, its mere existence as a physical shop was viewed on Wall Street as being decidedly outdated, and its business model was hurtling towards failure.

The history of financial markets has been littered with examples of painful short squeezes. But what has been particularly noteworthy about the GameStop episode—and certainly in contrast to the Volkswagen short squeeze—is that the stock surge was mostly driven by many small traders rather than a few big ones. The fact that its stock price, despite crashing back down to earth around a week after https://www.forex-world.net/ hitting its peak, has once again surged over $200 in recent days also suggests that the stock’s wild rollercoaster ride is not quite over just yet. The group WallStreetBets, which has a thriving membership on the popular social-media discussion forum site Reddit, was especially buoyant about GameStop’s fortunes, which helped push its share price higher during the final quarter of 2020.

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This bearish view was only further reinforced by GameStop’s share price, which had been on a long-term downtrend—from just below $50 at the start of 2014 to a mere $3 about a year ago. As the tug-of-war between the everyday investors and hedge funds heated up and support grew for GameStop on r/wallstreetbets, the stock skyrocketed more than 50% in the trading session on Jan. 22. During after hours and pre-market trading that weekend, the GameStop continued to climb.

1. A brokerage that marketed itself as being accessible to small retail investors and promoting the democratisation of finance and investing was all of a sudden suspending its service to those very investors at the most crucial time.
2. By the end of the year, the company’s stock was trading at almost $20.
3. But the bigger and longer-lasting impact may be on how the market itself operates.
4. WSB takes something of an internet extremist’s approach to investing.
5. Because short sellers — frequently hedge funds — in essence are betting against a company’s success, it can be a risky position.
6. With fewer people out shopping due to the pandemic and most games being sold online, things weren’t looking great for the company.

Gamestonk is a reference to GameStop and to “stonk,” internet slang for stock. GameStop shares would go from trading at around $43 (already significantly more than it traded at at the beginning of the year) to as much as $380, becoming one of the most traded stocks on the market along the way. “The reason why that’s important is if there’s people betting the stock is going to go down, and if they’re wrong and the stock price gets pushed up, then what will happen is eventually they will capitulate and they will give up,” Moallemi said. “And the act of capitulation is basically to buy back their short position, which will even drive the stock higher.”

The stock market drama has been called a “David and Goliath” battle. A company worth $1.3 billion on the stock market on New Year’s Eve was worth about $21 billion at the end of last week, roughly the same as Kellogg’s, the cereal maker, which, unlike GameStop, is solidly profitable. But, as with so many retail stars, GameStop began to struggle a decade or so ago as gamers, like everybody else, made more of their purchases on the internet, opting for downloaded games or two-day delivery over a visit to the mall. The demand raised its share price massively, which nobody saw coming, and everyone who had banked on it dropping in value had to buy their shares back.

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And they know a lot of the money going in is from amateur investors. Another theory is that although amateur investors on WallStreetBets are the trigger, bigger institutional investors do the real moving. “The way the platform works is the content gets served to you based on how many upvotes it has. There’s no evidence that any of this is illegal, although Nasdaq CEO Adena Friedman has said stock exchanges and regulators need to pay attention to the potential for schemes fueled by social media. “We are excited to bring our customer-obsessed mindset and technology experience to GameStop and its strategic assets,” Cohen said in a statement at the time.

It also seems to represent a shift in market behaviour, whereby the price of a stock does not necessarily reflect its underlying value. Or rather, it is yet another example of an ongoing decoupling of a company’s share price from its fundamentals, one that had already begun in earnest with the rise of passive-investment instruments, such as exchange-traded funds (ETFs). When buying into an ETF, an investor effectively gains exposure to all of the company constituents of that ETF, irrespective of their individual prices. And when selling, the investor similarly sells all the constituents at the same time.

What is GameStop?

E Acquired SFMI Micromania (“Micromania”), a France-based video game retailer operating 332 video game stores expanding GameStop’s operations into France. A Acquired a majority interest in Gamesworld Group Limited (“Gamesworld”), an Ireland-based video game retailer operating 10 stores expanding GameStop’s operations into Ireland. GameStop’s Australian division has been focused on increasing higher-margin merchandise and opening more large format hybrid stores which include both an EB Games and Zing Pop Culture store in a single location. These locations have an expanded selection of merchandise based on both games and pop culture.

And, the theory goes, many retail investors used their cheques to invest in the stock market. In the past month, I have been told multiple times hedge funds were too clever to allow this again. History suggests that no stock can go up forever, and over time, stock prices generally reflect the expected future earnings of corporations.