What happened
Retail merchants on Reddit’s WallStreetBets forum caused quite a stir, creating small pressures in late January, an uproar that ended in a well-publicized Congressional hearing. But that was not the end of the story, and GameStop (NYSE: GME) stocks are running again, up more than 450% last month.
More recently, a second stock run that started this week continues today, with stocks rising another 14% at 10 am EST.
And
The resurgence comes as some underlying business news combines with the momentum of retail commerce. Earlier this week, GameStop announced that it has formed a new “strategic planning and capital allocation committee” to be led by Ryan Cohen. Cohen, investors should remember, was the spark that triggered the initial tightening of GameStop’s stock.
Image source: Getty Images.
The company that was being shorted by hedge funds in the booming world of e-commerce added Cohen to its board of directors in January. Cohen co-founded, and then successfully sold, online pet retailer Rubber (NYSE: CHWY). WallStreetBets followers believed he could rejuvenate GameStop’s tough business in an online video game sales force.
What now
The new committee aims to convert GameStop into a “technology business”. It will explore several ways to expand digital channels and adjust your current organizational structure. The question for investors is whether the Reddit crowd has put shares in a bubble of enthusiasm or whether the business can really grow online to meet the valuation.
Investors should have more to continue when the company reports its fourth quarter and fiscal year 2020 earnings, after the market closed on March 23.
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