- The biggest video game retailer has had some crazy years.
- The share price was below $ 5 per share in mid-August, but its stock price has skyrocketed in recent weeks.
- It turns out that this explosion has little to do with video games, GameStop or the video game market.
- Visit the Business Insider home page for more stories.
In early 2019, GameStop’s stock price fell from a cliff: it dropped from about $ 16 per share to less than $ 4.
And he stayed in that range for just two years.
Even in 2020, while the video game business (including GameStop) saw huge gains during coronavirus blockages, GameStop’s stock price remained in the gutter. Until August – just under five months ago – the largest video game retail chain had an inventory value of less than $ 5 per share.
But in the second half of 2020, with big financial names like Michael Burry and Ryan Cohen buying stocks from the struggling retailer, things started to improve. The company’s stock value gradually increased until it completely exceeded the value before the collapse in late 2020.
And it was then that really strange: between January 20 and 26, GameStop’s stock price jumped from just over $ 35 per share to the north of $ 140 per share. On January 27, it reached new highs of more than $ 325 per share – an increase of more than 8,000% over just a few months ago.
The movement in the value of GameStop’s shares last month demonstrates how much its value has increased.
Google
But why?
The answer has little to do with GameStop, nothing to do with video games and a lot to do with a Reddit forum dedicated to playing in the stock market.
The forum, called Wall Street Bets, has more than 2 million members, and it is the collective action of these members that seems to be increasing the value of GameStop shares. Simply put: the more people buy the stock, the price increases. And there is no sign that this collective action will stop anytime soon.
“GME has jumped and is again at $ 225,” said a Reddit forum thread on Wednesday morning. “Hold on to strong boys … we’ll take GME for $ 1,000.”
Another topic urged users not to sell and to remove the $ 1,000 price limit, which would automatically trigger sales.
“GME will continue until WE sell. It doesn’t sell kids, $ 1,000 was the original target, but nothing prevents it from reaching $ 5,000 beyond us,” he said. “It looks like a meme, but it isn’t. Hold on and make Daddy Musk proud!”
More than anything else, the predominant theme on Wall Street Bets is collective power – enough collective power to push hedge funds and analysts who predicted that GameStop’s shares would never reach such heights.
“FOR ALL THE GREAT HEDGE FUNDS OF THE F — ING THAT MONITOR US, THIS IS A MESSAGE FROM US TO YOU, WE HAVE YOU NOW, F —. YOU. GO TO BUY THE — ING NEWS. Short and comment, so that they can see this post. F — YOUR MELVIN CAPITAL. F — YOUR CITRON RESEARCH. YOU DID NOT CLOSE S —. THIS WILL COME DOWN IN HISTORY “, said one of those posts.
An image of the Wall Street Bets subreddit.
Youtube
But that does not mean that the value will remain in the long run or that GameStop is worth the value of the shares to its shareholders.
The explosion in GameStop’s stock value is “just a cult phenomenon,” Michael Pachter, managing director of Wedbush Securities, told Insider. “They do not currently have the profit power to sustain such a high price,” he added.
That’s because, like Blockbuster and Tower Records before it, GameStop faces major challenges for its business model from the internet. As more people buy video games from digital stores, fewer people buy games on physical discs. And GameStop is in the business of selling physical discs.
Despite a shake-up on the company’s board and the addition of Cohen to the company’s board, GameStop did not reveal a long-term plan to avoid oblivion.
“The market seems to believe that Ryan Cohen has a strategy that will greatly increase profits,” said Pachter. “I can’t give you credit for your genius until I see what the strategy is.”
Do you have a tip? Contact Business Insider senior correspondent Ben Gilbert by email ([email protected]) or Twitter DM (@realbengilbert) We can keep sources anonymous. Use a non-functional device to reach. PR proposals by email only, please.