The problem is the amplitude of the market distortion social-media driven, frenzied buying can create. The dizzying heights that GameStop’s valuation reached benefits only those who get off the ride before it stops. For everyone else, it makes the stock toxic until reality sets in.
Full Answer
What happened with GameStop stock?
1 hour ago · What happened. GameStop (NYSE: GME) shareholders lost ground to the market on Monday as the stock had fallen 7% by 3 p.m. ET compared to a slight uptick in the S&P 500. The specialty retailer is ...
Why did GameStop stock rise?
Jan 30, 2021 · “GameStop is sort of written off” as something that can’t compete with Amazon, van Dreunen says. (Other stocks that were targeted include BlackBerry, Blockbuster and Nokia.) So ” [n]ostalgia...
What happened to GameStop stocks?
Jan 30, 2021 · GameStop is a retailer facing the same pressures as many others in the United States, where shopping trends and the pandemic have led more people to buy goods online instead of in stores. Wall...
What exactly happened with GameStop?
Feb 02, 2021 · GameStop shareholders are learning painful but valuable lessons. The first is that buying into overhyped stocks in hopes that they will soar "to the moon" is a misguided and dangerous game. The...
What is the issue with GameStop stock?
Popular investing app Robinhood became the focus of the controversy after it decided to freeze trades for GameStop on Jan. 28. Shares of the video game retailer spiked after traders on Reddit began frantically buying the company's stock. GameStop shares have since came crashing down only to shoot up once again.Mar 17, 2021
Why is GameStop a problem?
The obvious problem with GameStop (NYSE:GME) is that it sells physical video game discs out of thousands of stores in a world where games are increasingly going digital. The pandemic has made the situation much worse as would-be video game buyers pivoted hard toward digital downloads and buying games online.Feb 1, 2021
Why are GameStop stocks falling?
This Analyst Says 'Hold. ' GameStop reported fiscal third-quarter results that either showed continued struggles or signs of a much bigger transformation, with an acknowledgment by management that the retailer is branching out into areas like nonfungible tokens and blockchain.Dec 9, 2021
Why did everyone buy GameStop stock?
WallStreetBets members wound up being right about the squeeze, and GameStop bulls notched incredible gains as short-sellers were forced to buy back the stock at elevated levels in hopes of avoiding massive losses.Mar 19, 2021
Is GameStop reliable?
GameStop has a consumer rating of 3.43 stars from 414 reviews indicating that most customers are generally satisfied with their purchases. Consumers satisfied with GameStop most frequently mention great place and trade ins. GameStop ranks 7th among Games sites.
Is GameStop still a good buy right now?
GameStop is down 70% from record highs but remains a high-risk bet for investors given its negative profit margins and falling revenue.Jan 20, 2022
Is GameStop going out of business?
GameStop Stores Are Closing At the end of 2020, GameStop announced that they planned to close 1,000 stores by March of 2021. GameStop's CFO Jim Bell explained the reasoning behind the closures, saying the move “will allow us to more efficiently and profitably service our customers.”Nov 23, 2021
Is GME short squeeze over?
The dollar amount of shorted GME shares has greatly declined over the last year, however. GameStop's share price also went through a large drop in pricing. A short squeeze, one year after GME gained traction on WallStreetBets, is unlikely to happen.Feb 12, 2022
What is the Reddit crew?
The Reddit crew are essentially “play ing the metagame” — a term used in role-play video games when players strategize outside of the rules of the game, says Joost van Dreunen, who teaches the business of video games at the NYU Stern School of Business. “Retail investors do the same thing,” van Dreunen says.
Is GameStop a brick and mortar company?
GameStop is a brick-and-mortar retailer that many young people grew up with, but that had been declining in recent years. “GameStop is sort of written off” as something that can’t compete with Amazon, van Dreunen says. (Other stocks that were targeted include BlackBerry, Blockbuster and Nokia.)
Can you save a GameStop?
You can’t save a GameStop, you can’t probably save Blockbuster, but what you could do is kind of play around with it before it expires.”. That kind of nostalgia is appealing: Research has shown that nostalgia can combat loneliness, because it reminds us that we have social support and counteract feelings of boredom.
How many gamestops are there in 2020?
Image source: Getty Images. Amid this turmoil, GameStop has moved much of its operations online and taken an omnichannel approach. The company closed over 800 stores between the beginning of 2019 and the first nine months of 2020, quite a change for a company with over 5,000 locations.
How much impairment does GameStop have?
While it can bring a tax write-off, it also reduces overall income. GameStop reported $5 million in impairments versus more than $375 million in the first nine months of 2019. This is how GameStop narrowed its losses.
What is GameStop business?
1. GameStop's business. GameStop built a nationwide footprint by becoming a place to buy the latest video game releases. It also made itself a hub where people could buy, sell, and trade games, consoles, and accessories, and find other merchandise.
Is GameStop in decline?
GameStop remains a retailer in decline. Nonetheless, the encouraging growth rates in online sales offer hope for its survival. It has also benefited from speculative interest as average investors battle hedge funds. However, speculation rarely lasts for long periods.
Does GameStop have a moat?
However, while these moves may help the company to survive, they also leave GameStop with a narrow competitive moat. Physical games and other items to sell or trade gave gamers a reason to visit stores. Now, game downloads leave little room for differentiation or trades.
Does GameStop cut its way to a comeback?
Nonetheless, this shows that GameStop cannot cut its way to a comeback.
Who is Will Healy?
Will Healy is a freelance financial writer who has had a lifelong interest in the stock market, along with numerous, less-useful pursuits. Will pursued his passion for writing after working in the corporate world as both an analyst and an insurance sales professional.
What are the lessons of GameStop?
The first is that buying into overhyped stocks in hopes that they will soar "to the moon" is a misguided and dangerous game. The second is that short squeezes don't last forever.
What happens if you buy into the Manic Short Squeeze too late?
Traders who bought into the manic short squeeze too late are likely to suffer gruesome losses.
So, What the Bloody Hell Happened?
Why r/wallstreetbets chose GameStop in particular is not entirely clear. GameStop was in crisis due to the pandemic and is certainly happy about the attention. In the subreddit, people have been betting on GameStop shares over and over again for several months, driving up the prices. At the highest point, the value of a share was over $400.
How Could This Happen?
The traders at r/wallstreetbets are using a strategy that is actually super sophisticated. Normally, you buy stocks hoping that the price will rise, and you cancel them for more money. But there are also cases where bets are made on a falling price. Now, it's time for some economics...
Why Is This a Problem?
First of all, the whole thing sounds like a funny meme. “ Suck it, Wall Street, we'll take your money and push GameStop! ” This makes it all seems like a laughing matter, when actually, the whole thing is not without danger. This is because such sharp increases in stock prices can create bubbles in the market.
What is GameStop popular for?
GameStop is also popular with fans of pop culture collectibles, such as Star Wars toys and Funko ( FNKO) figurines, which help attract shoppers who aren't hardcore gamers to visit the brick and mortar shops.
Why did Left give up on GameStop?
Left has now given up on shorting GameStop, citing harassment by the stock's backers. He also tweeted last week that "too many people" were hacking Citron's Twitter feed, causing him to delay the posting of his video, which was originally planned for Wednesday. Left was not immediately available for further comment.
Who is on the board of GameStop?
The company announced earlier this month that Ryan Cohen, founder of online pet supply store Chewy, is now on GameStop's board along with two other former Chewy executives.
Who is Ryan Cohen?
The company announced earlier this month that Ryan Cohen, founder of online pet supply store Chewy, is now on GameStop's board along with two other former Chewy executives. Cohen's RC Ventures is one of the largest investors in GameStop.
What is short squeeze?
It’s called a short squeeze, and it involves investors betting on which way a stock will go — up or down. These bets are placed by buying the shares themselves, or stock options, which we’ll grossly oversimplify here. Investors who bet against a stock are called “shorts.”.
What is it called when you bet against a stock?
Investors who bet against a stock are called “shorts.”. In GameStop’s case, the shorts include at least two big hedge funds. Shorting a stock essentially means borrowing shares from a broker and selling them, with the agreement you’ll return the shares later. When the price falls, you buy back the shares and pocket the difference.
What happens if the stock price goes high?
That increases demand, which increases the stock’s price. Which means the brokers have to buy more shares, which means … you get the idea.
Is shorting a stock risky?
But shorting a stock is risky — if the price rises, you can lose big. Sometimes you just make a bad bet. But you can also lose if someone tries to push up the price by buying lots of shares, even though the company isn’t doing anything different. This is the squeeze.
Who is Melvin Capital?
Others are just riding the wave. And others want to squeeze Melvin Capital, a hedge fund that was shorting GameStop. They’re the ones quoting Heath Ledger’s Joker character from “The Dark Knight”: “It’s not about money; it’s about sending a message.”.
Who are the two billionaires who fought off Bill Ackman?
Usually, these kinds of standoffs involve sophisticated Wall Street investors, for example when Bill Ackman squared off against two other billionaires — Daniel S. Loeb and Carl C. Icahn — over the dietary supplement maker Herbalife.
