Photographer: Patrick T. Fallon / Bloomberg
Photographer: Patrick T. Fallon / Bloomberg
There is some irony in the fact that Reddit, an online chat community full of players, has boosted GameStop Corp. to unbelievable levels. After all, video game fans have for decades loved to hate the struggling retailer.
Last week, a collective of individual traders in Reddit’s r / WallStreetBets community sent GameStop shares to astronomical heights in an experiment to place them in hedge funds, which sold them short. Earlier this year, GameStop was trading at $ 17. On Wednesday afternoon, it was over $ 340, valuing the unprofitable company at more than $ 25 billion.
GameStop’s resuscitation may seem inherently good news for video game fans. But unlike beloved retailer Toys R Us Inc., GameStop has never been popular with gamers. The Reddit community that chose GameStop as the stock to pump may have been a great practical joke.
“It’s like in the movies, when bullies vote for the nerd to be the prom queen just to play with her,” he said. Andy Cortez, presenter and producer of the video game channel on YouTube Kind of funny.
Players have a long list of complaints about GameStop, based in Grapevine, Texas, from the way they treat employees to their aggressive and controversial sales tactics.
Over the years, many players reluctantly bought on GameStop just because they had no choice. The store made it easy to exchange old games for cash or to be used for other purchases, which fans with little money can appreciate. But the values have become a joke. A new game, which costs $ 60, can yield $ 30 on your local GameStop. Older games would yield a few dollars at most. Social media is full of jokes about how you can trade GameStop shares back to the retailer for a fraction of the price.
The company also became known for questionable practices, such as selling open copies of games as if they were new. Sometimes customers would take home a “new” game only to find that someone else’s saved file was already in the cartridge.
Many video game fans grew tired of the way GameStop treated employees and the way those employees had to act with customers. The worker’s performance was linked to the number of pre-sales of games and reward cards they sold, which led to constant sales. It was impossible to call or visit a GameStop store without being forced to pre-order the next games.
In 2017, GameStop made headlines for its the controversial Circle of Life program, which essentially punished employees for selling new games instead of used ones. As a result, some employees said they would lie to customers about whether they had new copies in stock.
Video game publishers don’t like GameStop, either. When customers bought used games, the people who actually made those games didn’t see a dime, which led companies like Electronic Arts Inc. to develop strategies to get people to buy new copies. The publisher decided to place a single-use code on each copy of some games, rewarding those who picked it up first – and punishing the second-hand market.
So for many players, seeing GameStop as the target of a joke on Wall Street is a dose of schadenfreude.
This widespread contempt for the retailer from all corners of the game industry probably helped fuel the frenzy behind GameStop on Reddit.
The inventory increase does not make sense. GameStop has struggled because many former customers have gone on to buy digital copies directly on their consoles. The coronavirus pandemic, which kept most people out of the malls where many GameStops operate, exacerbated the company’s decline and reported that sales fell 30% in the quarter ended October 31.
The r / WallStreetBets campaign shows that the majority of investors who drive stocks are motivated by a populist desire to topple hedge funds with large short positions. But the whole play was also spurred on by Internet jokes, or memes. And for gamers, there are few memes bigger than GameStop.
“If it was just Google or something, no one would care much,” said Allen, a post on the air / WallStreetBets who asked only to be identified by his first name, in a telephone interview. “But it’s funny that it’s GameStop, that we’re going to hire a hedge fund because they sold GameStop short. There are great memes that can be made from it. “
Allen said he now owns more than 1,000 shares in the retailer, which he bought a few months ago for less than $ 20. He said he sees this as an opportunity for GameStop to become a better company without pressure from Wall Street short sellers. . “If this company is going to close, they deserve to close on their own terms,” said Allen.